SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of Earliest Event Reported): February 25, 1999
BE AEROSPACE, INC.
(Exact name of registrant as specified in charter)
DELAWARE 0-18348 06-1209796
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
1400 Corporate Center Way, Wellington, Florida 33414
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 791-5000
Exhibit Index Appears on page 12.
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On February 25, 1999, BE Aerospace, Inc., a Delaware corporation (the
"Company"), completed the sale (the "Sale") of a 51% membership interest (the
"Membership Interest") in In-Flight Entertainment, LLC, a Delaware limited
liability company ("IFE"), to Sextant Avionique, Inc., a Florida corporation
("Sextant"), a wholly owned subsidiary of Sextant Avionique, S.A., pursuant to a
Purchase Agreement, dated January 25, 1999 (the "Agreement") between the Company
and Sextant. A copy of the Agreement is attached to this report as Exhibit 2.1.
Prior to the completion of the Sale, IFE was wholly owned by the Company and its
wholly owned subsidiaries. The Company and its wholly owned subsidiaries
continue to own a 49% membership interest in IFE.
The purchase price paid by Sextant to the Company for the Membership
Interest was $62,000,000 in cash. The terms of the Agreement provide for the
final price for the 51% interest to be determined on the basis of operating
results for IFE over the two-year period ending February 28, 2000. Depending on
the operating results during that period, the final purchase price could range
from $47,000,000 to $87,000,000. The Company used the proceeds from the Sale to
repay a portion of its bank line of credit.
In connection with the Sale, the Company and Sextant have entered into
an Amended and Restated Limited Liability Company Agreement (the "LLC
Agreement") governing the rights of the members of IFE. A copy of the LLC
Agreement is included in Exhibit 2.1 hereto. As of the closing of the Sale, the
name of IFE was changed to "Sextant In-Flight Systems, LLC".
Item 7. Financial Statements and Exhibits
(a) Not applicable
(b) Pro forma Financial Information
The following unaudited pro forma combined financial statements and
notes thereto are attached hereto at pages PF-1 through PF-7:
(i) Pro forma combined statements of operations for the year ended
February 28, 1998
(ii) Notes to pro forma combined statements of operations for the
year ended February 28, 1998
<PAGE>
(iii) Pro forma combined statements of operations for the nine
months ended November 28, 1998
(iv) Notes to pro forma combined statements of operations for the
nine months ended November 28, 1998
(v) Pro forma combined balance sheet as of November 28, 1998
(vi) Notes to pro forma combined balance sheet as of November 28,
1998
(c) Exhibits.
Exhibit No. Description
----------- -----------
2.1 Purchase Agreement dated as of January 25, 1999
between BE Aerospace, Inc. and Sextant Avionique,
Inc. together with the exhibits thereto.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BE AEROSPACE, INC.
By: /s/ Thomas P. McCaffrey
--------------------------------------
Name: Thomas P. McCaffrey
Title: Corporate Senior Vice President
of Administration and Chief
Financial Officer
<PAGE>
UNAUDITED PRO FORMA COMBINED
FINANCIAL INFORMATION OF BE AEROSPACE, INC.
AND ITS CONSOLIDATED SUBSIDIARIES
The following unaudited pro forma combined statements of
operations and unaudited combined balance sheet give effect to the Sale by the
Company of a 51% membership interest in In-Flight Entertainment, LLC ("IFE") to
Sextant Avionique, Inc. ("Sextant"), a wholly owned subsidiary of Sextant
Avionique, S.A., as discussed in Item 2, and the use of the proceeds from the
Sale to repay a portion of the Company's bank line of credit. Prior to the
completion of the Sale, IFE was wholly owned by the Company and its wholly owned
subsidiaries.
The pro forma combined statements of operations for the year
ended February 28, 1998 and the nine months ended November 28, 1998 assume that
the Sale and the use of the net proceeds to repay the Company's bank line of
credit occurred on February 23, 1997. The pro forma combined statements of
operations for the year ended February 28, 1998 excludes the non-recurring gain
on the Sale.
The pro forma combined statements of operations for the year
ended February 28, 1998 and the nine months ended November 28, 1998 reflect the
deconsolidation of IFE, the use of the equity method of accounting for the
Company's 49% interest in IFE and certain other adjustments related to cost
allocations and interest expense arising from the Sale and application of the
net proceeds.
The pro forma combined balance sheet as of November 28, 1998
assumes that the Sale of the 51% interest in IFE to Sextant occurred on November
28, 1998. The pro forma combined statements of operations and balance sheet do
not purport to represent the results of operations or financial position of the
Company had the transactions and events assumed therein occurred on the dates
specified, nor are they necessarily indicative of the results of operations that
may be achieved in the future.
The pro forma combined financial information is based on
assumptions and adjustments described in the notes to the pro forma financial
statements. The Company has not included the non-recurring net gain on the Sale
of the 51% interest in IFE in the accompanying pro forma financial statements.
The pro forma financial information should be read in conjunction with the
Company's historical financial statements, including notes thereto, which are
incorporated herein by reference.
PF-1
<PAGE>
BE Aerospace, Inc.
Pro Forma Combined Statements of Operations (Unaudited)
Year Ended February 28, 1998
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Other
B/E Adjustment(a) Adjustments As Adjusted
--------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 487,999 $ (81,094) $ -- $ 406,905
Cost of sales 309,094 (39,391) -- 269,703
--------- --------- --------- ---------
Gross Profit 178,905 (41,703) -- 137,202
Operating expenses:
Selling, general and administrative 58,622 (9,522) 2,152 (b) 51,252
Research, development and engineering 45,685 (21,426) -- 24,259
Amortization expense 11,265 (382) -- 10,883
Other expenses 4,664 -- -- 4,664
--------- --------- --------- ---------
Total operating expenses 120,236 (31,330) 2,152 91,058
--------- --------- --------- ---------
Operating earnings 58,669 (10,373) (2,152) 46,144
Interest expense, net 22,765 (1,562) (5,371)(c) 15,832
Equity in earnings of In-Flight Entertainment -- -- 4,312 (d) 4,312
--------- --------- --------- ---------
Earnings before income taxes
and extraordinary item 35,904 (8,811) 7,531 34,624
Income taxes 5,386 -- (192)(e) 5,194
--------- --------- --------- ---------
Earnings before extraordinary item 30,518 (8,811) 7,723 29,430
Extraordinary item 8,956 -- -- 8,956
--------- --------- --------- ---------
Net earnings $ 21,562 $ (8,811) $ 7,723 $ 20,474
========= ========= ========= =========
Basic earnings per share:
Earnings before extraordinary item $ 1.36 $ 1.31
Extraordinary item (0.40) (0.40)
--------- ---------
Net earnings $ 0.96 $ 0.91
========= =========
Weighted average common shares 22,442 22,442
Diluted earnings per share:
Earnings before extraordinary item $ 1.30 $ 1.25
Extraordinary item (0.38) (0.38)
--------- ---------
Net earnings $ 0.92 $ 0.87
========= =========
Weighted average common shares 23,430 23,430
</TABLE>
See accompanying notes to Pro Forma Combined Statements of Operations for the
Year Ended February 28, 1998.
PF-2
<PAGE>
BE Aerospace, Inc.
Notes to Pro Forma Combined Statements of Operations
Year ended February 28, 1998
(a) To deconsolidate IFE from the Company's consolidated results.
(b) Represents actual B/E corporate allocations to IFE that would have been
allocated to other facilities had the Sale taken place on February 23,
1997.
(c) Represents the reduction in the Company's interest expense that would
have been realized had the Sale and use of the net proceeds from the Sale
to repay a portion of the Company's bank line of credit occurred on
February 23, 1997.
(d) To record B/E's equity earnings in its 49% investment in IFE.
(e) To adjust income tax expense to the Company's effective tax rate.
PF-3
<PAGE>
BE Aerospace, Inc.
Pro Forma Combined Statements of Operations (Unaudited)
Nine Months Ended November 28, 1998
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Other
B/E Adjustment(a) Adjustments As Adjusted
-------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 492,094 $ (59,529) $ -- $ 432,565
Cost of sales 305,004 (35,976) -- 269,028
--------- --------- --------- ---------
Gross Profit 187,090 (23,553) 163,537
Operating expenses:
Selling, general and administrative 58,715 (9,825) 2,515 (b) 51,405
Research, development and engineering 40,827 (10,743) -- 30,084
Amortization expense 16,038 (1,115) -- 14,923
In-process research and development and
acquisition-related expenses 79,155 (7,540) -- 71,615
--------- --------- --------- ---------
Total operating expenses 194,735 (29,223) 2,515 168,027
--------- --------- --------- ---------
Operating losses (7,645) 5,670 (2,515) (4,490)
Interest expense, net 27,816 (3,114) (4,028)(c) 20,674
Equity in loss of In-Flight Entertainment -- -- (4,274)(d) (4,274)
--------- --------- --------- ---------
Loss before income taxes (35,461) 8,784 (2,761) (29,438)
Income taxes 7,428 -- (258)(e) 7,170
--------- --------- --------- ---------
Net Loss $ (42,889) $ 8,784 $ (2,503) (36,608)
========= ========= ========= =========
Basic loss per share:
Net loss $ (1.72) $ (1.47)
========= =========
Weighted average common shares 24,946 24,946
Diluted loss per share:
Net loss $ (1.72) $ (1.47)
========= =========
Weighted average common shares 24,946 24,946
</TABLE>
See accompanying notes to Pro Forma Combined Statements of Operations for
the Year Ended February 28, 1998.
PF-4
<PAGE>
BE Aerospace, Inc.
Notes to Pro Forma Combined Statements of Operations
Nine Months Ended November 28, 1998
(a) To deconsolidate IFE from the Company's consolidated results.
(b) Represents actual B/E corporate allocations to IFE that would have been
allocated to other facilities had the Sale taken place on February 23, 1997.
(c) Represents the reduction in the Company's interest expense that would have
been realized had the Sale and use of the net proceeds from the Sale to
repay a portion of the Company's bank line of credit occurred on February
23, 1997.
(d) To record B/E's equity earnings in its 49% investment in IFE.
(e) To adjust income tax expense to the Company's effective tax rate.
PF-5
<PAGE>
BE Aerospace, Inc.
Pro Forma Consolidated Balance Sheet (Unaudited)
November 28, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
Other
B/E Adjustment(a) Adjustments As Adjusted
-------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 34,548 $ (8) $ 59,675 (b) $ 34,540
(59,675)(c)
Account receivable - trade, net 136,119 (9,703) -- 126,416
Inventories, net 205,466 (32,393) -- 173,073
Other current assets 11,559 (276) -- 11,283
--------- --------- --------- ---------
Total current assets 387,692 (42,380) -- 345,312
Property and equipment, net 144,661 (8,454) -- 136,207
Intangibles & other assets, net 449,887 (17,116) -- 432,771
Investment in unconsolidated subsidiary -- 35,923 (18,321)(b) 17,602
--------- --------- --------- ---------
$ 982,240 $ (32,027) $ (18,321) $ 931,892
========= ========= ========= =========
Liabilities & Stockholders' Equity
Current liabilities
Accounts payable $ 70,426 $ (15,454) $ -- $ 54,972
Accrued liabilities 79,843 (6,213) -- 73,630
Current portion of long-term debt 11,689 -- -- 11,689
--------- --------- --------- ---------
Total current liabilities 161,958 (21,667) -- 140,291
Long-term debt 630,592 -- (59,675)(c) 570,917
Deferred income taxes 1,148 -- -- 1,148
Other liabilities 31,128 (10,360) 15,000 (b) 35,768
--------- --------- --------- ---------
Total liabilities 824,826 (32,027) (44,675) 748,124
--------- --------- --------- ---------
Stockholders' equity
Common stock 244 -- -- 244
Additional paid-in capital 243,993 -- -- 243,993
Accumulated deficit (83,613) 26,354 (b) (57,259)
Cumulative foreign exchange
translation adjustment (3,210) -- -- (3,210)
--------- --------- --------- ---------
Total stockholders' equity 157,414 -- 26,354 183,768
--------- --------- --------- ---------
$ 982,240 $ (32,027) (18,321) 931,892
========= ========= ========= =========
</TABLE>
See accompanying notes to Pro Forma Combined Statements of Operations for
the Year Ended February 28, 1998.
PF-6
<PAGE>
BE Aerospace, Inc
Notes to Pro Forma Combined Balance Sheet
November 28, 1998
(a) To deconsolidate IFE from B/E's consolidated balance sheet.
(b) To record the estimated net proceeds, non-recurring net gain and the
Company's 49% interest in IFE resulting from the Sale ($15 million of the
estimated net proceeds of the Sale are deferred in accordance with
generally accepted accounting principles.
(c) Reflects the repayment of a portion of the Company's line of credit.
PF-7
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibits Page
----------- ----------------------- ----
2.1 Purchase Agreement dated as of January 25, 13
1999 between BE Aerospace, Inc. and Sextant
Avionique, S.A.
EXECUTION COPY
================================================================================
------------------
PURCHASE AGREEMENT
------------------
dated as of January 25, 1999,
between
BE AEROSPACE, INC.,
and
SEXTANT AVIONIQUE, INC.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms..........................................1
1.02. Other Defined Terms............................................6
1.03. Use of Defined Terms...........................................7
ARTICLE II
PURCHASE AND SALE
2.01. Purchase and Sale..............................................7
2.02. Purchase Price.................................................7
2.03. Closing........................................................7
2.04. Purchase Price Adjustment......................................8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
3.01. Incorporation and Authority of Seller..........................9
3.02. Organization and Qualification of the Company.................10
3.03. Membership Interests of the Company...........................10
3.04. Subsidiaries..................................................11
3.05. No Conflict...................................................11
3.06. Financial Statements..........................................12
3.07. Employment Relations..........................................12
3.08. Absence of Certain Changes or Events..........................12
3.09. Absence of Litigation.........................................15
3.10. Compliance with Laws..........................................15
3.11. Consents, Approvals, Licenses, Etc............................15
3.12. Personal Property.............................................16
3.13. Real Property.................................................16
3.14. Employee Benefit Matters......................................16
3.15. Taxes.........................................................18
3.16. Material Contracts............................................19
3.17. Brokers.......................................................21
3.18. Insurance.....................................................21
3.19. No Undisclosed Liabilities....................................21
3.20. Environmental Matters.........................................21
3.21. Books and Records.............................................23
3.22. Intellectual Property.........................................23
3.23. Interests in Clients, Suppliers, Etc..........................23
<PAGE>
(ii)
Page
----
3.24. Permits.......................................................24
3.25. Year 2000 Problem.............................................24
3.26. Inventory; Receivables........................................24
3.27. Warranties: Warranty Claims..................................25
3.28. Compensation of Employees.....................................25
3.29. Assets........................................................25
3.30. Government Contracts..........................................25
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.01. Incorporation and Authority of the Purchaser..................26
4.02. No Conflict...................................................26
4.03. Consents and Approvals........................................27
4.04. Absence of Litigation.........................................27
4.05. Investment Purpose............................................27
4.06. Financing.....................................................27
4.07. Brokers.......................................................27
ARTICLE V
ADDITIONAL AGREEMENTS
5.01. Conduct of Business Prior to the Closing......................27
5.02. Access to Information.........................................30
5.03. Confidentiality...............................................30
5.04. Regulatory and Other Authorizations; Releases; Consents.......30
5.05. Projections...................................................31
5.06. Non-Competition...............................................32
5.07. No Solicitation of Employees..................................32
5.08. Further Action................................................32
5.09. Transitional Services.........................................32
5.10. Conveyance Taxes..............................................32
5.11. Exclusive Dealing.............................................32
5.12. Financial Statements..........................................33
5.13. Transfer of Contracts.........................................33
5.14. Transfer of Intellectual Property.............................33
ARTICLE VI
EMPLOYEE MATTERS
6.01. Employee Benefit Plans........................................34
<PAGE>
(iii)
Page
----
ARTICLE VII
CONDITIONS TO CLOSING
7.01. Conditions to Obligations of the Seller.......................36
7.02. Conditions to Obligations of the Purchaser....................37
ARTICLE VIII
INDEMNIFICATION
8.01. Survival......................................................39
8.02. Indemnification by the Purchaser..............................39
8.03. Indemnification by the Seller.................................40
8.04. Indemnification Procedures....................................42
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.01. Termination...................................................44
9.02. Effect of Termination.........................................45
9.03. Waiver........................................................45
ARTICLE X
GENERAL PROVISIONS
10.01. Expenses.....................................................45
10.02. Notices......................................................46
10.03. Public Announcements.........................................47
10.04. Headings.....................................................47
10.05. Severability.................................................47
10.06. Entire Agreement.............................................47
10.07. Assignment...................................................48
10.08. No Third-Party Beneficiaries.................................48
10.09. Waivers and Amendments.......................................48
10.10. Specific Performance.........................................48
10.11. Governing Law; Dispute Resolution............................48
10.12. Counterparts.................................................49
<PAGE>
DISCLOSURE SCHEDULE
SECTION
1.01 Officers of the Seller and the Company
2.04 Purchase Price Adjustment Procedure
3.03 Encumbrances
3.04 Subsidiaries
3.05 Conflicts
3.06 1998 Financial Statements; Accounting Procedures
3.08 Certain changes or Events
3.09 Litigation
3.10 Compliance with Laws
3.11 Consents
3.12 Personal Property
3.13 Real Estate
3.14 Benefit Plans
3.15 Taxes
3.16 Material Contracts
3.18 Insurance
3.19 Liabilities
3.20 Employee Benefits
3.21 Books and Records
3.22 Intellectual Property
3.24 Permits
3.25 Year 2000 Problem
3.27 Warranties
3.28 Employee Compensation
3.30 Government Contracts
5.01 Conduct of the Business
7.02(e) Required Approvals
EXHIBITS
Exhibit 1.01(a) Form of Operating Agreement
Exhibit 1.01(b) Form of Guaranty
Exhibit 7.01(h) Purchaser's Bank Letter
Exhibit 7.02(f) Seller's Bank Letter
<PAGE>
PURCHASE AGREEMENT, dated as of January 25, 1999, between BE
AEROSPACE, INC., a Delaware corporation (the "Seller"), and SEXTANT AVIONIQUE,
INC., a Florida corporation (the "Purchaser").
WHEREAS, the Seller owns 98% of the membership interests (the
"Interests") in In-Flight Entertainment, LLC, a Delaware limited liability
company (the "Company") including: (i) 100% of the Class One Interests in the
Company and (ii) 96% of the Class Two Interests in the Company;
WHEREAS, the Seller wishes to sell to the Purchaser, and the
Purchaser wishes to purchase from the Seller, the Class One Interests, upon the
terms and subject to the conditions set forth herein; and
WHEREAS, pursuant to a Guaranty to be executed on the date
hereof in the form attached hereto as Exhibit 1.01(b) (the "Guaranty"),
Aerospatiale Thomson Electronique de Vol, ATEV, a societe anonyme organized
under the laws of France (the "Guarantor"), has agreed to guarantee the
obligations of the Purchaser under this Agreement;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements and covenants hereinafter set forth, the Purchaser and the
Seller hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms have the following meanings:
"Action" means any claim, action, suit, arbitration or
proceeding by or before any Governmental Authority or arbitrator.
"ACCTV Business" means activities relating to the distribution
of pictures from cameras mounted externally and internally on commercial
passenger aircraft for entertainment, security and crew control purposes
conducted initially using assets received by the Seller from Puritan Bennett
Aero Systems Co.
"Adjusted EBITDA" has the meaning specified in Section 2.04 of
the Disclosure Schedule.
"Affiliate" means, when used with respect to a specified
Person, another Person that, either directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with the
Person specified.
<PAGE>
2
"Agreement" means this Purchase Agreement, dated as of January
25, 1999, between the Seller and the Purchaser (including, the Schedules and
Exhibits hereto, and the Disclosure Schedule) and all amendments and
modifications hereto made in accordance with Section 10.09.
"Books and Records" means all books of account and other
financial and business records of or pertaining to the Company.
"Business Day" means any day that is not a Saturday, a Sunday
or other day on which banks are required or authorized by law to be closed in
New York City or Paris, France.
"Class One Interests" means the Class One Membership Interest
(as defined in the Limited Liability Company Agreement) of the Company.
"Class Two Interests" means the Class Two Membership Interest
(as defined in the Limited Liability Company Agreement) of the Company.
"Condition" of any Person means the business, properties,
assets, liabilities, operations, results of operations or financial condition of
such Person.
"control" (including the terms "controlled by" or "under
common control with"), with respect to the relationship between or among two or
more Persons, means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the affairs or
management of a Person, whether through the ownership of voting securities, as
trustee or executor, by contract or otherwise, including, without limitation,
the ownership, directly or indirectly, of securities having the power to elect a
majority of the board of directors or similar body governing the affairs of such
Person.
"Disclosure Schedule" means the Disclosure Schedule dated as
of the date of this Agreement delivered to the Purchaser by the Seller.
"Encumbrance" means any security interest, pledge, mortgage,
lien, charge, adverse claim of ownership or use, or other encumbrance of any
kind.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended and the rules and regulations thereunder.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time applied consistently throughout the
period involved.
<PAGE>
3
"Governmental Authority" means any government, any
governmental entity, department, commission, board, agency or instrumentality,
and any court, tribunal, or judicial or arbitral body, whether federal, state or
local.
"Governmental Order" means any order, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations thereunder.
"In Flight Entertainment Systems" means any product, including
systems, equipment, software, services and support services related thereto, for
entertainment, passenger information, passenger communication, and monitoring
purposes used solely by passengers and cabin crew on board aircraft.
"Intellectual Property" means all domestic and foreign
patents, patent applications, registered and unregistered trademarks, trade
names, internet domain names and service marks, registered and unregistered
copyrights, computer software programs, databases, inventions, trade secrets and
proprietary information of any type, whether or not written.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended through the date hereof and the rules and regulations
thereunder.
"IRS" means the United States Internal Revenue Service.
"knowledge" or "known" means, with respect to any matter in
question, with respect to the Seller, the actual knowledge of any executive
officer of the Seller or the Company listed on Schedule 1.01 after due inquiry
reasonably appropriate for an officer holding a particular position.
"Law" means any federal, state or local statute, law,
ordinance, regulation, rule, code, order or rule of common law.
"Leased Real Property" means, with respect to the Company or
any subsidiary, the real property leased by the Company or such subsidiary, as
tenant, together with, to the extent leased by the Company or such subsidiary,
all buildings and other structures, facilities or improvements currently or
hereafter located thereon, all fixtures, systems, equipment and items of
personal property of the Company or such subsidiary attached or appurtenant
thereto, and all easements, licenses, rights and appurtenances relating to the
foregoing.
"Leases" means, with respect to the Company or any subsidiary,
the leases for the Company's or such subsidiary's Leased Real Property.
<PAGE>
4
"Liabilities" means any and all debts, liabilities and
obligations, whether accrued or fixed, absolute or contingent, matured or
unmatured or determined or determinable.
"Limited Liability Company Agreement" means the Second Amended
and Restated Limited Liability Company Agreement of Sextant In-Flight Systems,
LLC among the Seller, BE Intellectual Property, Inc., Puritan-Bennett Aero
Systems Co., the Purchaser and the other Persons being Members from time to
time, a copy of which is attached hereto as Exhibit 1.01.
"Losses" of a Person means any and all losses, liabilities,
damages, claims, awards, judgments, costs and expenses (including, without
limitation, reasonable attorney's fees) actually suffered or incurred by such
Person.
"Material Adverse Effect" means any change or effect in the
Condition of the Company and its subsidiaries taken as a whole, except for any
such changes or effects resulting from (i) changes in general economic,
regulatory or political conditions or changes that affect the business of
manufacturing, marketing and distributing In-Flight Entertainment Systems in
general (including changes in the financial markets), and (ii) this Agreement or
the transactions contemplated hereby or the announcement thereof.
"Members" has the meaning specified in the Limited Liability
Company Agreement.
"1998 Balance Sheet" means the unaudited balance sheet of the
Company as of October 31, 1998, together with the notes thereon, prepared on a
basis consistent with the accounting procedures set forth on Section 3.06 of the
Disclosure Schedule.
"1998 Financial Statements" means the 1998 Balance Sheet, the
unaudited statements of income and cash flow of the Company for the 10-month
period ended on October 31, 1998, together with the notes thereon, prepared on a
basis consistent with the accounting procedures set forth on Section 3.06 of the
Disclosure Schedule.
"Permit" means any federal, state, local, foreign or other
governmental or other third party permit (including occupancy permit),
certificate, license, franchise, order, waiver, consent or authorization held by
the Company or any of its subsidiaries.
"Permitted Encumbrances" means (a) Encumbrances for inchoate
mechanics' and materialmen's liens for construction in progress and workmen's,
repairmen's, warehousemen's and carriers' liens arising in the ordinary course
of business of the Company or any subsidiary which in the aggregate with respect
to the Company and all subsidiaries have a value of less than $150,000, (b)
Encumbrances (i) for Taxes not yet payable or (ii) for Taxes being contested in
good faith for which adequate reserves have been made in the 1998 Balance
<PAGE>
5
Sheet, (c) Encumbrances created by this Agreement and (d) Encumbrances and
imperfections of title the existence of which would not materially affect the
use of the property subject thereto.
"Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity.
"Returns" means all returns, statements and reports for Taxes.
"Tax" or "Taxes" means all taxes, fees, duties, assessments or
other governmental charges, including, without limitation, all income, gross
receipts, sales, use, employment, franchise, profits, property, gains, capital
stock, transfer, excise, license, payroll, withholding or other taxes, fees,
stamp taxes and duties, assessments or charges of any kind whatsoever (whether
payable directly or by withholding), together with any interest and any
penalties, additions to tax or additional amounts imposed by any taxing
authority with respect thereto.
"Year 2000 Problem" means any significant risk that computer
hardware, software or equipment containing embedded microchips essential to the
business or operations of the Company and its subsidiaries or products produced
by the Company and its subsidiaries (including products currently in
development) containing such computer hardware, software or embedded microchips
will not in the case of dates or times occurring after December 31, 1999, solely
due to its failure to calculate effectively dates and times, function at least
as effectively and reliably as in the case of times or time periods occurring
before January 1, 2000, including the making of accurate leap year calculations.
<PAGE>
6
SECTION 1.02. Other Defined Terms. The following terms have
the meanings defined for such terms in the Sections set forth below:
Term Section
- ---- -------
Accounting Firm 2.04(b)
Acquired Competing Business 5.06(a)
Adjustment Statement 2.04(a)
Adjustment Years 2.04(a)
Arbitration Notice 10.11(b)
Benefit Plans 3.14(a)
Closing 2.03(a)
Closing Date 2.03(a)
Code 3.14
Company Recitals
Company Intellectual Property 3.22
Company's 401(k) Plan 6.01(e)
Compete 5.06(a)
Disputes 10.11(b)
ER&D Expenses 2.04(a)
Exon-Florio Amendment 3.11
Guarantor Recitals
Guaranty Recitals
Indemnified Party 8.04(a)
Indemnifying Party 8.04(a)
Interests Recitals
Material Contracts 3.16(a)
Non-Competition Period 5.06(a)
Non-Objecting Party 2.04(a)(ii)
Notice of Objection 2.04(a)(ii)
Options 3.03
Purchase Price 2.02
Purchaser Preamble
Purchaser Indemnified Party 8.03(a)
Purchaser's Threshold Amount 8.02(b)
Seller Preamble
Seller Indemnified Party 8.02(a)
Seller's 401(k) Plan 6.01(e)
Seller's SERPs 6.01(d)
Seller's Threshold Amount 8.03(b)
<PAGE>
7
Term Section
- ---- -------
subsidiary 3.04(a)
Territory 5.06(a)
Voting Debt 3.03
WARN 3.07(e)
SECTION 1.03. Use of Defined Terms. The meanings of the terms
defined in this Agreement shall be applicable to the singular as well as the
plural forms of such terms, unless otherwise stated.
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale. Upon the terms and subject to
the conditions set forth in this Agreement, the Seller agrees to sell to the
Purchaser, and the Purchaser agrees to purchase from the Seller, the Class One
Interests.
SECTION 2.02. Purchase Price. The aggregate purchase price
(the "Purchase Price") shall be $62,000,000 in cash. The Purchase Price shall be
payable as provided in Section 2.03(c).
SECTION 2.03. Closing. (a) Subject to the terms and conditions
of this Agreement, the sale and purchase of the Class One Interests contemplated
hereby shall take place at a closing (the "Closing") to be held at 10:00 a.m.,
local time, on the first Business Day that is not a Monday, after the later of
the following occurs: (i) the expiration or termination of the applicable
waiting periods under the HSR Act and (ii) the satisfaction or waiver of all
other conditions to the obligations of the parties set forth in Article VII, at
the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York
10022, or at such other time or on such other date or at such other place as the
Seller and the Purchaser may mutually agree upon in writing (the day on which
the Closing takes place being the "Closing Date").
(b) At the Closing, the Seller shall deliver or cause to be
delivered to the Purchaser: (i) such instruments and documents as shall be
reasonably necessary to effect the transfer of the Class One Interests to the
Purchaser; and (ii) the certificate required to be delivered pursuant to Section
7.02(a).
(c) At the Closing, the Purchaser shall deliver to the Seller:
(i) the Purchase Price, by wire transfer in immediately available funds, to an
account designated at least two Business Days prior to the Closing Date by the
Seller in a written notice to the Purchaser; and (ii) the certificate required
to be delivered pursuant to Section 7.01(a).
<PAGE>
8
SECTION 2.04. Purchase Price Adjustment. (a) Adjustment
Statement. (i) As soon as practicable after February 28, 2001, but in any event
no later than June 1, 2001, the Company shall cause to be prepared a statement
(the "Adjustment Statement") setting forth (i) the aggregate amount of
engineering, research and development expenses of the Company which were funded
by the Company during the period commencing on March 1, 1999 and ending on
February 28, 2001 (collectively, the "Adjustment Years"), excluding expenses
paid for by customers of the Company (the "ER&D Expenses") and (ii) the Adjusted
EBITDA of the Company for the Adjustment Years. The Adjustment Statement will be
prepared in accordance with GAAP and in a manner consistent with the policies
and principles used by the Company in connection with the preparation of the
1998 Balance Sheet.
(ii) In the event neither the Purchaser nor the Seller objects
to the determination by the Company of the preliminary Adjustment Statement by
written notice of objection (the "Notice of Objection") delivered to the Company
and the other party hereto (the "Non-Objecting Party") within thirty (30) days
after the delivery of the Adjustment Statement (such Notice of Objection to
describe in reasonable detail the proposed adjustments or objections to the
proposed Adjustment Statement), the Adjustment Statement shall be deemed final
and binding on the parties hereto.
(iii) If either the Purchaser or the Seller delivers a Notice
of Objection to the Adjustment Statement, then any dispute shall be resolved in
accordance with Section 2.04(b).
(iv) The Company will make available to both the Purchaser and
the Seller all work papers and records used in the preparation of the Adjustment
Statement.
(b) Resolution of Disputes. (i) If either or both of the
Purchaser or the Seller delivers a Notice of Objection, then the Purchaser and
the Seller shall promptly endeavor to resolve any differences with respect to
the Adjustment Statement. In the event that a written agreement as to the
matters contained in the Adjustment Statement has not been reached within thirty
(30) days after the date of receipt by the Company and any Non-Objecting Party
of the Notice of Objection, then the determination of the matters contained in
the Adjustment Statement shall be submitted to PriceWaterhouse Coopers LLP (or,
in the event that PriceWaterhouse Coopers LLP is unwilling or unable to act in
such capacity or is not, at the time of such submission, independent of the
Purchaser and the Seller, to another internationally recognized independent
accounting firm mutually acceptable to the Purchaser and the Seller (either
PricewaterhouseCoopers LLP or such other accounting firm being referred to
herein as the "Accounting Firm")).
(ii) Nothing herein shall be construed to authorize or permit
the Accounting Firm to determine any question or matter whatever under or in
connection with this Agreement, except the determination of what adjustments, if
any, should be made in one or more of the items reflected in the Adjustment
Statement in order for the ER&D Expenses and Adjusted EBITDA to be determined in
accordance with the provisions of this Agreement. In
<PAGE>
9
making its determination, the Accounting Firm shall act as an expert and not as
an arbitrator in an arbitration proceeding.
(iii) Within forty-five (45) days of the submission of any
dispute concerning the determination of the Adjustment Statement to the
Accounting Firm, the Accounting Firm shall render a decision in accordance with
this Section 2.04(b) along with a statement of reasons therefor. The decision of
the Accounting Firm shall be final and binding upon each party hereto.
(iv) The fees and expenses of the Accounting Firm for any
determination under this Section 2.04(b) shall be apportioned equally between
the Purchaser and the Seller.
(c) Adjustments to Purchase Price. Upon the final
determination of the Adjustment Statement, the parties shall make the
adjustments set forth in Section 2.04 of the Disclosure Schedule.
(d) Credit Lines. Each of the Purchaser and the Seller shall
maintain a line of credit from a commercial bank meeting the requirements set
forth in Section 7.01(h) hereof, with a minimum unused availability equal to
their maximum payment obligation under this Section 2.04, to provide liquidity
for the payment of any obligation which might arise as a result of the
adjustments made pursuant to this Section 2.04. In the event that either party
fails at any time to maintain such a line of credit, such party shall
immediately notify the other party in writing of such failure.
(e) Any payment required to be made by the Seller or the
Purchaser pursuant to this Agreement shall bear interest from the date such
payment is due through the date of payment at a rate equal to the one month
London Interbank Offered Rate as announced in The Wall Street Journal plus 300
basis points.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Purchaser as
follows:
SECTION 3.01. Incorporation and Authority of Seller. The
Seller is a corporation validly existing and in good standing under the laws of
the State of Delaware and has all necessary corporate power and authority to
enter into this Agreement, to carry out its obligations hereunder and to
consummate the transactions contemplated hereby. The Seller is duly qualified to
do business and is in good standing in each jurisdiction in which the properties
owned or leased by it or the operation of its business makes such qualification
necessary, except to the extent that the failure to be so qualified would not
have a Material
<PAGE>
10
Adverse Effect. The execution and delivery of this Agreement by the Seller, the
performance by the Seller of its obligations hereunder and the consummation by
the Seller of the transactions contemplated hereby have been duly authorized by
all requisite action on the part of the Seller. This Agreement has been duly
executed and delivered by the Seller, and (assuming due authorization, execution
and delivery by the Purchaser of this Agreement) this Agreement constitutes a
legal, valid and binding obligation of the Seller enforceable against the Seller
in accordance with its terms, subject to the effect of any applicable
bankruptcy, reorganization, insolvency, moratorium or similar laws affecting
creditors' rights generally and subject, as to enforceability, to the effect of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
SECTION 3.02. Organization and Qualification of the Company.
The Company is duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite power and authority to own,
operate or lease the properties and assets now owned, operated or leased by it
and to carry on its business as currently conducted by the Company. The Company
is duly qualified as a foreign organization to do business, and is in good
standing, in each jurisdiction where the character of its properties owned,
operated or leased or the nature of its activities makes such qualification
necessary, except to the extent that the failure to be so qualified would not
have a Material Adverse Effect. True and complete copies of the Certificate of
Formation and Limited Liability Company Agreement, each of the foregoing as
amended to the date of this Agreement, have been made available for review by
the Purchaser.
SECTION 3.03. Membership Interests of the Company. The Class
One Interests constitute 51% of the Interests in the Company. The Class Two
Interests constitute 49% of the Interests in the Company. Except as described in
the preceding sentence, there are no other interests or securities authorized
for issuance with respect to the Company. The Interests have been duly
authorized and validly issued, are fully paid and nonassessable, and were not
issued in violation of or subject to any preemptive rights. There are no
options, warrants or rights of conversion or other rights, agreements,
arrangements or commitments relating to the Interests (collectively, "Options"),
of the Company obligating the Company to issue or sell any of its Interests. The
Seller and its Affiliates own all of the Interests in the Company, free and
clear of all Encumbrances, except for: (i) any Encumbrances set forth on Section
3.03 of the Disclosure Schedule and (ii) any Encumbrances created under this
Agreement. Neither the Company nor any subsidiary has any authorized or
outstanding bonds, debentures, notes or other indebtedness the holders of which
have the right to vote (or convertible or exchangeable into or exercisable for
securities having the right to vote) with the Members of the Company or
shareholders of any of such subsidiary, as the case may be, on any matter
("Voting Debt"). There are no voting trusts, stockholder agreements, proxies or
other similar such agreements or arrangements in effect with respect to the
voting or transfer of the Interests, other than the Limited Liability Company
Agreement. The delivery to the Purchaser of the Class One Interests pursuant to
the provisions of this Agreement will transfer
<PAGE>
11
to the Purchaser good and valid title thereto, free and clear of all
Encumbrances arising through the Seller, the Company or their Affiliates.
SECTION 3.04. Subsidiaries. (a) Set forth on Section 3.04 of
the Disclosure Schedule are all corporations, limited liability companies,
partnerships, associations or other entities which are controlled by the Company
(each, a "subsidiary") or in which the Company has any equity interest. Each
subsidiary is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization (as set forth on Section 3.04 of
the Disclosure Schedule), and has all requisite power to own its property and to
carry on its business as now being conducted. Except as set forth on Section
3.04 of the Disclosure Schedule, neither the Company nor any subsidiary is a
member of (and no part of the business of the Company or any subsidiary is
conducted through) a partnership, nor is the Company or any subsidiary a
participant in any joint venture or similar arrangement.
(b) Set forth on Section 3.04 of the Disclosure Schedule is a
list of jurisdictions in which each subsidiary is qualified or licensed to do
business. Each subsidiary is duly qualified to do business and is in good
standing in each jurisdiction in which the character or location of the
properties owned, leased or operated by such subsidiary or the nature of the
business conducted by such subsidiary makes such qualification necessary, except
for such jurisdictions where the failure to be so qualified or licensed and in
good standing would not have a Material Adverse Effect.
(c) Each subsidiary has the capitalization set forth on
Section 3.04 of the Disclosure Schedule. All of the outstanding shares of
capital stock or other equity securities, as the case may be, of each subsidiary
have been duly authorized and validly issued, are fully paid and nonassessable
and are not subject to, nor were they issued in violation of, any preemptive
rights, and, except as set forth on Section 3.04 of the Disclosure Schedule, are
owned, of record and beneficially, by the Company or a subsidiary of the
Company, free and clear of all Encumbrances. There are no outstanding Options
relating to the capital stock or other equity securities, as the case may be, of
any subsidiary of the Company, pursuant to which such subsidiary, the Company or
any other subsidiary of the Company is or may become obligated to issue or
purchase any shares of capital stock or other equity securities of such
subsidiary or any securities convertible into, exchangeable for, or evidencing
the right to subscribe for, any capital stock or other equity securities of such
subsidiary other than such rights granted to the Company or a subsidiary of the
Company.
(d) There are no restrictions of any kind which prevent or
restrict the payment of dividends by any subsidiary of the Company.
SECTION 3.05. No Conflict. Assuming all consents, approvals,
authorizations and other actions described in Section 3.11 have been obtained
and all filings and notifications listed in Section 3.11 of the Disclosure
Schedule have been made, and except as may result from any facts or
circumstances relating solely to the Purchaser or as described
<PAGE>
12
in Section 3.05 of the Disclosure Schedule, the execution, delivery and
performance of this Agreement by the Seller does not and will not (a) violate,
conflict with or result in a breach of any provision of the charter or by-laws
(or similar organizational documents) of the Seller, the Company or any
subsidiary, (b) conflict with or violate any Law or Governmental Order
applicable to the Seller, the Company or any subsidiary or any of the assets or
properties of the Company or any subsidiary, or (c) result in any breach of, or
constitute a default (or event which with the giving of notice or lapse of time,
or both, would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of any Encumbrance on the Interests or on any of the assets or
properties of the Company or any subsidiary pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument relating to such assets or properties to which the Seller, the
Company or any subsidiary is a party or by which any of such assets or
properties is bound or affected, except as would not, individually or in the
aggregate, (i) have a Material Adverse Effect or (ii) create any claim against
the Purchaser.
SECTION 3.06. Financial Statements. True and complete copies
of the 1998 Financial Statements have been delivered to the Purchaser. The 1998
Financial Statements have been prepared in accordance with the accounting
practices set forth in Section 3.06 of the Disclosure Schedule attached hereto,
and subject to changes required by such practices, fairly present in all
material respects the financial position and results of operations of the
business of the Company and its subsidiaries as of each date and for the period
covered thereby in conformity with GAAP. The 1998 Balance Sheet reflects all
Liabilities of the Company required to be reflected on the 1998 Balance Sheet in
accordance with GAAP, subject to the changes required by the accounting
practices set forth in Section 3.06 of the Disclosure Schedule. Since October
31, 1998, there has been no Material Adverse Effect.
SECTION 3.07. Employment Relations. (a) Each of the Company
and its subsidiaries is in substantial compliance with all material federal,
state or other applicable laws, domestic or foreign, respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and has not since December 31, 1996 and is not engaged in any unfair labor
practice.
(b) No unfair labor practice complaint against the Company or
any of its subsidiaries is pending before the National Labor Relations Board.
(c) There is no labor strike, dispute, slowdown or stoppage
pending or, to the knowledge of the Seller, threatened against or involving the
Company or any of its subsidiaries.
(d) Neither the Company nor any of its subsidiaries is party
to any labor agreement with respect to its employees with any labor
organization, group or association and no such agreement is currently being
negotiated by the Company or any of its subsidiaries.
<PAGE>
13
(e) There has been no "layoff" or "plant closing" as defined
by the Worker Adjustment Retraining and Notification Act ("WARN") during the
ninety (90) days prior to the date of this Agreement.
(f) No representation question exists respecting the employees
of the Company or any of its subsidiaries.
(g) Neither the Company nor any of its subsidiaries has
experienced any material labor difficulty during the last three years.
SECTION 3.08. Absence of Certain Changes or Events. From
October 31, 1998 to the date of this Agreement and except as set forth in
Section 3.08 of the Disclosure Schedule or as contemplated by this Agreement,
the business of the Company and its subsidiaries has been conducted in the
ordinary course of business consistent with past practice. As amplification and
not limitation of the foregoing, since October 31, 1998, there has not been:
(a) any destruction or loss of a material portion of the
assets or properties of the Company or any of its subsidiaries that is
not covered by insurance;
(b) except in the ordinary course of business consistent with
past practice, any Encumbrance of any kind created on any properties or
assets (whether tangible or intangible) of the Company or any
subsidiary, other than (i) Permitted Encumbrances, (ii) Encumbrances
that will be released at or prior to the Closing and (iii) Encumbrances
on assets having a value not exceeding $50,000 in the aggregate;
(c) except in the ordinary course of business consistent with
past practice, any sale, assignment, transfer, lease or other
disposition or agreement to sell, assign, transfer, lease or otherwise
dispose of any of the fixed assets of the Company or any subsidiary
having an aggregate value, together with any such sale, arrangement,
transfer, lease, disposition or agreement with respect to the fixed
assets of the Company, exceeding $50,000 or any cancellation of any
indebtedness owed to the Company or any subsidiary exceeding $50,000;
(d) any acquisition (by merger, consolidation, or acquisition
of stock, interests or assets) by the Company or any subsidiary of any
Person or division thereof;
(e) except in the ordinary course of business consistent with
past practice, (i) any incurrence by the Company or any subsidiary of
any indebtedness for borrowed money, (ii) any issuance by the Company
or any subsidiary of any debt securities or (iii) any assumption,
granting, guarantee or endorsement, or other accommodation arrangement
making the Company or any subsidiary responsible for, the Liabilities
of
<PAGE>
14
any Person, in the case of (i), (ii) and (iii) above, having an
aggregate value exceeding $50,000;
(f) any change in any method of accounting or accounting
practice used by the Company or any subsidiary, other than such changes
(i) required by GAAP or (ii) set forth in Section 3.06 of the
Disclosure Schedule;
(g) any redemption of Interests;
(h) (i) any grant of any increase, or announcement of any
increase, in the wages, salaries, compensation, bonuses, incentives,
pension or other benefits payable by the Company or any subsidiary to
any of its employees, including, without limitation, any increase or
change pursuant to any Benefit Plan, or (ii) any establishment or
increase or promise to increase any benefits under any Benefit Plan, in
either case except for ordinary increases consistent with past
practices of the Company or any subsidiary;
(i) except for agreements, arrangements or transactions with
the Purchaser or having an individual value of less than $100,000, any
agreement, arrangement or transaction between the Company or any
subsidiary and any of their Affiliates;
(j) any material amendment to any Material Contract except in
the ordinary course of business consistent with past practice;
(k) any capital expenditure or commitment in an amount in
excess of $100,000, except in the ordinary course of business
consistent with past practice;
(l) any declaration, payment or setting aside of any dividend
or distribution with respect to, or split, combination, redemption or
reclassification, purchase or other acquisition, direct or indirect, of
any Interests;
(m) any loans to any Person or Persons in an aggregate
amount in excess of $100,000;
(n) any write-off as uncollectible of any notes or accounts
receivable, except write-offs in the ordinary course of business
charged to applicable reserves, none of which individually or in the
aggregate is material to the Company or its subsidiaries;
(o) any tax election or settlement and/or compromise of
any tax liability in excess of $50,000;
<PAGE>
15
(p) any payment, discharge or satisfaction of any Liabilities
of the Company or any subsidiary, other than payment, discharge or
satisfaction of Liabilities in the ordinary course of business
consistent with past practice; or
(q) any agreement to take any actions specified in this
Section 3.08, except for this Agreement.
SECTION 3.09. Absence of Litigation. Except as set forth in
Section 3.09 of the Disclosure Schedule, (a) there are no Actions pending or, to
the knowledge of the Seller, threatened against the Seller, the Company, any
subsidiary or any of the assets or properties of the Company or any subsidiary
that, individually or in the aggregate, would have a Material Adverse Effect or
would restrain or prevent the Seller from consummating the transactions
contemplated hereby and (b) neither the Company nor any subsidiary and their
respective assets and properties are subject to any Governmental Order having a
Material Adverse Effect.
SECTION 3.10. Compliance with Laws. The Company, its
subsidiaries and the conduct of the business of the Company and its subsidiaries
are in compliance with all applicable Laws, except (a) as set forth on Section
3.10 of the Disclosure Schedule or (b) where the failure to comply would not
have a Material Adverse Effect. None of the Seller, the Company nor any
subsidiary has received any written notice from any Governmental Authority to
the effect that the Seller, the Company or such subsidiary, respectively, is not
in compliance with any applicable Laws except as set forth on Section 3.10 of
the Disclosure Schedule.
SECTION 3.11. Consents, Approvals, Licenses, Etc. (a) No
consent, approval, authorization, license, order or permit of, or declaration,
filing or registration with, or notification to, any Governmental Authority, or
any other Person, is required to be made or obtained by the Seller, the Company
or any subsidiary in connection with the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby,
except: (i) as set forth on Section 3.11 of the Disclosure Schedule; (ii)
applicable requirements, if any, of the HSR Act; (iii) applicable requirements,
if any, of the Exon-Florio Amendment to the Omnibus Trade and Competitiveness
Act of 1988 (the "Exon-Florio Amendment"); (iv) where the failure to obtain such
consents, approvals, authorizations, licenses, orders or permits of, or to make
such declarations, filings or registrations or notifications would not,
individually or in the aggregate, prevent the Seller from performing its
obligations under this Agreement and would not have a Material Adverse Effect;
and (v) as may be necessary as a result of any facts or circumstances relating
solely to the Purchaser.
(b) The failure by the Seller to obtain the consents,
approvals, authorizations, licenses, orders, permits, or declarations, or to
make the filings, registrations or notifications, set forth in Section 3.11(b)
of the Disclosure Schedule will not in the aggregate have a Material Adverse
Effect.
<PAGE>
16
SECTION 3.12. Personal Property. Except as disclosed in
Section 3.12 of the Disclosure Schedule, the Company or its subsidiaries own,
have a valid leasehold interest in or have the legal right to use all of the
tangible personal property necessary to carry on the business of the Company and
its subsidiaries, free and clear of all Encumbrances, except Permitted
Encumbrances or Encumbrances reflected on the 1998 Financial Statements. The
personal property used by the Company or any of its subsidiaries in its
business, in the aggregate, is in good operating condition and repair, ordinary
wear and tear excepted, and, in the aggregate, is adequate and suitable for the
purposes for which it is currently being used.
SECTION 3.13. Real Property. (a) The Company and its
subsidiaries do not own any real property.
(b) Section 3.13(b) of the Disclosure Schedule lists each
parcel of Leased Real Property of the Company or its subsidiaries. Copies of all
Leases have been provided to the Purchaser. Except as disclosed on Section
3.13(b) of the Disclosure Schedule, the Company or its subsidiaries, as of the
date of this Agreement, (i) has a valid and subsisting leasehold interest in
each such Lease, (ii) is in undisturbed possession of all space that it is
currently entitled to possess under each such Lease and no rights adverse to the
rights of the Company have, to the knowledge of the Seller, been asserted by any
third Persons, (iii) has not subleased or assigned any interest in any such
Lease and (iv) is not in default under any such Lease such that the landlord has
the right to terminate such Lease. The Leased Real Property, in the aggregate,
is in good condition and repair, ordinary wear and tear excepted, and, in the
aggregate, is adequate and suitable for the purposes for which it is currently
being used.
SECTION 3.14. Employee Benefit Matters. (a) Set forth in
Section 3.14(a) of the Disclosure Schedule is an accurate and complete list of
all domestic and foreign (i) "employee benefit plans," within the meaning of
Section 3(3) of ERISA; (ii) bonus, stock option, stock purchase, restricted
stock, incentive, fringe benefit, "voluntary employees' beneficiary
associations" under Section 501(c)(9) of the Internal Revenue Code of 1986, as
amended ("Code"), profit-sharing, pension or retirement, deferred compensation,
medical, life, disability, accident, salary continuation, severance, accrued
leave, vacation, sick pay, sick leave, supplemental retirement and unemployment
benefit plans, programs, arrangements, commitments and/or practices (whether or
not insured); and (iii) employment, consulting, termination, and severance
contracts or agreements; in each case for active, retired or former employees or
directors, whether or not any such plans, programs, arrangements, commitments,
contracts, agreements and/or practices (referred to in (i), (ii) or (iii) above)
are in writing or are otherwise exempt from the provisions of ERISA, that have
been established, maintained or contributed to (or with respect to which an
obligation to contribute has been undertaken) or with respect to which any
potential material liability is borne by the Company or any of its subsidiaries
(including, for this purpose and for the purpose of all of the representations
in this Section 3.14, any predecessors to the Company and all employers (whether
or not incorporated)
<PAGE>
17
that would be treated together with the Company or any of its subsidiaries as a
single employer within the meaning of Section 414 of the Code ("Benefit Plans").
(b) With respect to each Benefit Plan, the Seller has made
available to the Purchaser a copy of (i) the most recent annual report (Form
5500 or 990) filed with the IRS, (ii) such Benefit Plan, together with all
amendments thereto or a written description of any Benefit Plan which is not in
writing, (iii) if applicable, each trust agreement, declaration of trust, and
other documents establishing other funding arrangements (and all amendments
thereto and the latest financial statements thereof) relating to such Benefit
Plan, (iv) the most recent summary plan description and summary of material
modifications and material communications, (v) the most recent determination
letter, if any, issued by the IRS with respect to any Benefit Plan that is
intended to be qualified under Section 401(a) or 501(c)(9) of the Code, (vi) the
most recently prepared financial statements for each Benefit Plan for which such
statements are required, and (vii) all contracts and agreements relating to each
Benefit Plan, including, without limitation, service provider agreements,
insurance contracts, annuity contracts, investment management agreements,
subscription agreements, participation agreements, and recordkeeping agreements
and collective bargaining agreements.
(c) With respect to the Benefit Plans, except as set forth in
Section 3.14(c) of the Disclosure Schedule, no event has occurred and, to the
knowledge of the Seller, there exists no condition or set of circumstances, in
connection with which the Company would likely be subject to any liability under
the terms of such Benefit Plans, ERISA, the Code or any other applicable Law
which would result in a material liability to the Company (other than the
Company's obligations to pay contributions or premiums or to provide benefits as
a participating employer under the terms of such Benefit Plans).
(d) Except as set forth in Section 3.14 (d) of the Disclosure
Schedule, no Benefit Plan is subject to Section 302 or Title IV of ERISA or
Section 412 of the Code and no Benefit Plan which is a group health plan is a
"multiple employer welfare arrangement," within the meaning of Section 3(40) of
ERISA. Except as provided in Section 3.14(d) or the Disclosure Schedule, neither
the Company nor any of its subsidiaries has ever maintained or contributed to,
nor had any obligation to contribute to (nor borne any material liability with
respect to) any "multiple employer plan" (within the meaning of the Code or
ERISA) or any "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA).
Neither the Company nor any of its subsidiaries has any unfunded liabilities
pursuant to any Benefit Plan that is not intended to be qualified under Section
401(a) of the Code that would result in a material liability to the Company.
Each Benefit Plan, or trust established in connection with such Benefit Plan
that is intended to be qualified under Sections 401(a) and 501(a) of the Code
has been determined to be so qualified by the IRS. Since the date of the most
recent determination referred to above, to the knowledge of the Seller, no event
has occurred and no condition or circumstance has existed that resulted or is
likely to result in the revocation of any such determination or that is likely
to have an adverse effect on the qualified status or any such Benefit Plan or
the exempt status or any such trust.
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18
(e) The Seller has made available to the Purchaser (i) copies
of all material employment agreements with officers of the Company, (ii) copies
of all material severance agreements, programs and policies of the Company with
or relating to their employees, and (iii) copies of all plans, programs,
agreements and other arrangements of the Company with or relating to its
employees that contain change in control provisions.
(f) No Benefit Plan of the Company provides retiree medical or
retiree life insurance benefits to any person.
(g) There are no actions, suits, claims or disputes pending,
or, to the knowledge of the Seller, threatened, anticipated or reasonably
expected to be asserted against or with respect to any Benefit Plan or the
assets of any such plan (other than routine claims for benefits and appeals of
denied routine claims) which could have a Material Adverse Effect. No civil or
criminal action brought pursuant to the provisions of Title 1, Subtitle B, Part
5 of ERISA is pending, or, to the knowledge of the Seller, threatened,
anticipated, or expected to be asserted against the Seller or any of its
subsidiaries or any fiduciary of any Benefit Plan, in any case with respect to
any Benefit Plan. No Benefit Plan or, to the knowledge of the Seller, any
fiduciary thereof has been the direct or indirect subject of an audit
investigation or examination by any governmental or quasi-governmental agency
which would result in a material liability to the Company. All amounts which the
Company or any of its subsidiaries is required, under applicable law or under
any Benefit Plan or any agreement relating to any Benefit Plan to which the
Company or any of its subsidiaries is a party, to have paid as contributions or
premiums to any Benefit Plan as of the last day of the most recent fiscal year
of such Benefit Plan ended prior to the date hereof have been made or properly
accrued as of the last day of the most recent fiscal year of such Benefit Plan
except to the extent that any such failure to make or accrue a contribution or
premium would not result in a material liability to the Company. All accrued
benefits of employees of the Company under Seller's SERPs (as defined in Section
6.01(d)) as of the Closing Date have been fully funded under, and will be paid
from, the BE Aerospace, Inc.
Executive Deferred Compensation Trust.
(h) The execution of this Agreement and the consummation of
the transactions contemplated hereby, do not constitute a triggering event under
any Benefit Plan, policy, arrangement, statement, commitment or agreement,
whether or not legally enforceable, which (either alone or upon the occurrence
of any additional or subsequent event ) will or may result in any material
payment (whether of severance pay or otherwise), "parachute payment" (as such
term is defined in Section 280G of the Code), acceleration, vesting or increase
in benefits to any employee or former employee or director of the Company or any
of its subsidiaries. Except as set forth in Section 3.14(h) of the Disclosure
Schedule, no Benefit Plan provides for the payment of severance, termination,
change in control or similar type of payments or benefits.
SECTION 3.15. Taxes. Except as set forth in Section 3.15 of
the Disclosure Schedule, (a) the Company has timely filed or will timely file
all material Returns required to
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19
be filed by or with respect to the income, assets and operations of the Company
and its subsidiaries with respect to Taxes for any period or portion thereof
ending on or before the Closing Date, taking into account any extension of time
to file that has been granted to or obtained by the Company; (b) all Taxes
payable on such Returns or otherwise due with respect to income, assets and
operations of the Company for any period or portion thereof ending on or before
the Closing Date have been paid or adequately disclosed and fully provided for
on the 1998 Balance Sheet, or, to the extent such Taxes related to a period
after October 31, 1998, on the Books and Records of the Company; (c) no
deficiency for any material amount of Tax has been asserted or assessed by a
taxing authority against the Company or any subsidiary; (d) neither the Company
nor any subsidiary has been or is taxable as an association for federal income
tax purposes; (e) neither the Company nor any subsidiary has been the subject of
an audit or other examination of Taxes by the tax authorities of any nation,
state or locality or has received any notices from any taxing authority relating
to any issue which could affect the Tax liability of the Company or any
subsidiary; or has received notice from any taxing authority in a jurisdiction
where the Company does not file Returns asserting that the Company or any of its
assets are or may be subject to taxation by that jurisdiction; and (f) the
Company and each subsidiary have duly withheld or collected all Taxes which the
Company and each subsidiary are (or were) required by law to withhold or
collect, and have timely paid such Taxes over to the proper authorities to the
extent due and payable.
SECTION 3.16. Material Contracts. (a) Section 3.16(a) of the
Disclosure Schedule lists the following contracts (collectively, with the Leases
listed on Section 3.13(b) of the Disclosure Schedule, the "Material Contracts")
in effect as of the date of this Agreement to which the Company or any
subsidiary (subject, in each case, to the approvals described in Section 3.11 of
the Disclosure Schedule) is a party:
(i) any commitment, contract, agreement, note, loan, evidence
of indebtedness, purchase order or letter of credit (other than the
Leases listed on Section 3.13(b) of the Disclosure Schedule) that the
Seller reasonably anticipates will, in accordance with its terms,
involve aggregate payments by the Company or any subsidiary of more
than $250,000 within the 12 month period following the date of this
Agreement;
(ii) any lease of personal property involving any annual
expense in excess of $100,000;
(iii) any contracts or agreements containing covenants
limiting the freedom of the Company or any subsidiary to engage in any
line of business or compete with any Person;
(iv) any agreement, contract or commitment relating to the
employment of any Person by the Company or any subsidiary at an annual
compensation in excess of
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20
$100,000, or any bonus, deferred compensation, pension, profit sharing,
stock option, employee stock purchase, retirement or other employee
benefit plan;
(v) any agreement, indenture or other instrument which
contains restrictions with respect to payment of dividends or any other
distribution in respect of its interests or capital stock as the case
may be;
(vi) any loan (other than accounts receivable from trade
debtors in the ordinary course of business) or advance to (other than
travel allowances to the employees of the Company or any of its
subsidiaries), or investment in, any Person or any agreement, contract
or commitment relating to the making of any such loan, advance or
investment;
(vii) any agreement evidencing borrowings by the Company or
any subsidiary, including loan and credit agreements, promissory notes
and other instruments of indebtedness in each case relating to an
amount in excess of $100,000;
(viii) any guarantee or other contingent liability in respect
of any indebtedness or obligation of any Person in each case relating
to an amount in excess of $100,000 (other than the endorsement of
negotiable instruments for collection in the ordinary course of
business);
(ix) any management service, consulting, "golden parachute" or
other severance agreement, or any other similar type contract providing
for annual payments by the Company in excess of $100,000; and
(b) Except as set forth on Section 3.16(b) of the Disclosure
Schedule, no Material Contract has expired other than in accordance
with its terms or been otherwise terminated by the parties thereto.
Subject to the approvals described in Section 3.11 of the Disclosure
Schedule, neither the Company nor any subsidiary is (and, to the
knowledge of the Seller, no other party is), as of the date of this
Agreement (or, as of the Closing Date, except as would not have a
Material Adverse Effect), in material breach or material violation of,
or material default under, any of the Material Contracts, nor does
there exist any event, occurrence, condition or act (including the
transactions contemplated hereunder) which with the giving of notice or
lapse of time would become a material default or an event of default
thereunder. Subject to the approvals described in Section 3.11 of the
Disclosure Schedule, each Material Contract, and each agreement or
arrangement between the Company or any subsidiary, on the one hand, and
the Seller, on the other hand, is, as of the date of this Agreement, a
valid agreement, arrangement or commitment of the Company or such
subsidiary, enforceable against the Company or such subsidiary in
accordance with its terms and, to the knowledge of the Seller, is a
valid agreement, arrangement or commitment of each other party thereto,
enforceable against such party in accordance with its terms,
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21
except in each case where enforceability may be limited by bankruptcy,
insolvency or other similar laws affecting creditors' rights generally
and except where enforceability is subject to the application of
equitable principles or remedies.
SECTION 3.17. Brokers. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Seller.
SECTION 3.18. Insurance. Section 3.18(a) of the Disclosure
Schedule sets forth a complete list of all material insurance policies
(including policies providing property, casualty, liability and workers'
compensation coverage and bond and surety arrangements) with respect to which
the Company or any subsidiary is a party, a named insured or otherwise the
beneficiary of coverage. With respect to each such insurance policy: (i) such
policy is in full force and effect; (ii) neither the Company nor any subsidiary
nor, to the knowledge of the Seller, any other party to such policy is in
material breach or default thereunder, and no event has occurred which, with or
without notice or the lapse of time, would constitute such a material breach or
default, or permit termination, modification or acceleration under such policy;
and (iii) no party to such policy has repudiated any material provision thereof.
Since November 1, 1997, there has not been any material adverse change in the
Company's or any subsidiary's relationship with its insurers or in the premiums
payable pursuant to such policies. Since November 1, 1997, no insurer has
rejected an application for insurance coverage submitted by the Company or any
subsidiary.
SECTION 3.19. No Undisclosed Liabilities. Except as set forth
in Section 3.19 of the Disclosure Schedule or reflected or reserved against on
the 1998 Balance Sheet, and except for liabilities and obligations incurred in
the ordinary course of business consistent with past practice since October 31,
1998, to the knowledge of the Seller, there are no Liabilities of the Company or
any subsidiary which would have a Material Adverse Effect.
SECTION 3.20. Environmental Matters. Except as set forth in
Section 3.20 of the Disclosure Schedule:
(a) Except as would not have a Material Adverse Effect, each
of the Company and the subsidiaries (i) is in compliance with all
applicable Environmental Laws and (ii) holds all Environmental Permits
necessary for its operations and properties and is in compliance with
the terms and conditions of all such Environmental Permits.
(b) Since November 1, 1995, none of the Seller, the Company
nor any subsidiary has received any written claim, demand, notice or
complaint relating to the business of the Company and its subsidiaries
alleging violation of, or liability (including without limitation any
liability for site investigation, cleanup or corrective action) under,
any Environmental Laws.
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22
(c) Except as would not have a Material Adverse Effect,
neither the Company nor any subsidiary has treated, stored, disposed
of, arranged for or permitted the disposal of, transported, handled or
released any Hazardous Material, or owned or operated any facility or
property, so as to give rise to liabilities for response costs, natural
resource damages or attorneys fees pursuant to CERCLA or other
Environmental Laws.
(d) No written notice of a release of a Hazardous Material has
been filed by or on behalf of the Company or any subsidiary, and no
property or facility now or previously owned or operated by the Company
or any subsidiary is on the CERCLA National Priorities List (or
proposed for such listing), the Comprehensive Environmental Response,
Compensation, and Liability Information System list or any similar
state list.
(e) For purposes of this Agreement:
"CERCLA" means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended.
"Environmental Laws" means any federal, state, local
or foreign statute, law, ordinance, regulation, rule or code,
including any judicial or administrative order, consent decree
or judgment, relating to pollution or protection of the
environment or worker health and safety, including, without
limitation, those relating to the use, handling,
transportation, treatment, storage, disposal, release or
discharge, investigation or cleanup of Hazardous Materials, in
effect as of the date hereof.
"Environmental Permits" means any permit, approval,
identification number, license or other authorization required
of the Company or any subsidiary under any applicable
Environmental Law.
"Hazardous Materials" means (a) any petroleum,
petroleum products, by-products or breakdown products,
radioactive materials, asbestos-containing materials or
polychlorinated biphenyls, (b) any chemical, material or
substance defined or regulated as toxic or hazardous under any
applicable Environmental Law or (c) anything that is a
"hazardous substance" pursuant to CERCLA, anything that is a
"solid waste" or "hazardous waste" pursuant to RCRA or any
"pesticide", "pollutant", "contaminant", "toxic chemical" or
"noise".
"RCRA" means the Resource Conservation and Recovery
Act, as amended.
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23
SECTION 3.21. Books and Records. The respective minute books
of the Company and each of its subsidiaries, as previously made available to the
Purchaser and their representatives, contain accurate records of all meetings
of, and material corporate action taken by (including action taken by written
consent) the respective Members, shareholders, Governors or Boards of Directors,
as the case may be, of the Company and each subsidiary. Except as set forth on
Section 3.21 of the Disclosure Schedule, neither the Company nor any subsidiary
has any of its records, systems, controls, data or information recorded, stored,
maintained, operated or otherwise wholly or partly dependent upon or held by any
means (including any electronic, mechanical or photographic process, whether
computerized or not) which (including all means of access thereto and therefrom)
are not under the exclusive ownership and direct control of the Company or such
subsidiary.
SECTION 3.22. Intellectual Property. Schedule 3.22(a) attached
hereto contains a list of all Intellectual Property owned by or licensed to the
Company or any of its subsidiaries that is material to the operation of the
business of the Company or any of the subsidiaries, collectively, "Company
Intellectual Property". To the knowledge of the Seller, the business of the
Company and its subsidiaries as currently conducted requires no rights under
Intellectual Property other than rights owned by the Company or a subsidiary as
set forth in Schedule 3.22(a) or licensed to the Company and its subsidiaries
pursuant to a valid and effective license agreement as set forth in Schedule
3.22(a). Except as otherwise disclosed in Schedule 3.22(a), the Company and/or a
subsidiary owns all right and interest in a full legal, equitable and beneficial
ownership in the Company Intellectual Property including, without limitation,
exclusive rights to use, sell, transfer, assign and license the same. Except as
otherwise disclosed on Schedule 3.22(a), no consent of third parties will be
required for the use of any Company Intellectual Property as a consequence of
the consummation of the transactions contemplated hereby. To the knowledge of
the Seller, each item of Company Intellectual Property owned by the Company
and/or any of the subsidiaries listed on Schedule 3.22(a) has been duly
registered with, filed in, or issued by the appropriate domestic or foreign
governmental agency, to the extent required, and each such registration, filing
and issuance remains in full force and effect. To the knowledge of the Seller,
no Person has infringed or otherwise violated the Company's or any subsidiary's
right in any of the Company Intellectual Property. Except as set forth on
Schedule 3.22(a), no litigation is pending wherein the Company or any subsidiary
is accused of infringing or otherwise violating the Intellectual Property rights
of any other Person or of breaching a contract conveying rights under
Intellectual Property. Except as set forth on Schedule 3.22(a), no such claim
has been asserted or threatened against the Company or any subsidiary within the
past six (6) years.
SECTION 3.23. Interests in Clients, Suppliers, Etc. Neither
the Seller nor any Manager or Governor of the Company, nor any officer or
director of any subsidiary possesses, directly or indirectly, any financial
interest in, or is a director, officer or employee of, any Person which is a
client, supplier, customer, lessor, lessee, or competitor or potential
competitor of the Company or any subsidiary. Ownership of securities of a
company whose securities are registered under the Securities Exchange Act of
1934, as amended, of 5% or less
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24
of any class of such securities shall not be deemed to be a financial interest
for purposes of this Section 3.23.
SECTION 3.24. Permits. (a) The Seller has delivered or made
available to the Purchaser for inspection a true and correct copy of each of the
Permits. Any applications for the renewal of any such Permit which are due prior
to the Closing Date have been filed or will be timely filed by the Closing Date.
No proceeding to modify, suspend, revoke, withdraw, terminate or otherwise limit
any such Permit is pending or, to the best knowledge of the Seller, threatened
against the Seller. No administrative or governmental action adverse to the
Company or any subsidiary has been taken or, to the knowledge of the Seller,
threatened, in connection with the expiration, continuance or renewal of any
such Permit.
(b) Except as set forth on Section 3.24(b) of the Disclosure
Schedule, subject to the approvals described in Section 3.11 of the Disclosure
Schedule and except as would not have a Material Adverse Effect, each of the
Company, each of its subsidiaries and, to the extent necessary to the conduct of
the Company's or such subsidiary's business, the Seller, have obtained, and
maintain in force, all Permits required from any Governmental Authority to
operate the business of the Company and its subsidiaries in the manner in which
such business is currently operated.
SECTION 3.25. Year 2000 Problem. Each of the Purchaser and the
Seller acknowledge that they are sophisticated users and producers of computer
software. Computer software is used throughout the Company in its products,
business applications systems, business management systems, desk-top
applications, fax machines, telephones and other communications equipment and
embedded in micro-chips. The Seller has made reasonable efforts to modernize its
computer and other systems to avoid material harm to the business as a result of
the Year 2000 Problem. Section 3.25 of the Disclosure Schedule contains a list
of the actions that have been, or prior to the Closing Date will be, taken by
the Seller to avert a Year 2000 Problem with respect to the Company and its
subsidiaries and their respective products. There can be no assurance, however,
that the Year 2000 Problem will not cause a Material Adverse Effect.
SECTION 3.26. Inventory; Receivables. (a) All of the
inventories of the Company and its subsidiaries are suitable, usable or salable
in the ordinary course of business for the purposes for which intended, except
to the extent of normal obsolescence, and except to the extent written down to
realizable market value prior to or as of October 31, 1998 or for which adequate
reserves have been provided on the 1998 Balance Sheet in accordance with the
accounting practices described in Section 3.06 of the Disclosure Schedule.
(b) All accounts and notes receivable of the Company and its
subsidiaries reflected in the 1998 Balance Sheet or arising since October 31,
1998 have arisen in the ordinary course of business of the Company and its
subsidiaries from bona fide transactions and represent valid obligations due to
the Company or its subsidiaries in accordance with their terms, subject to the
reserve for bad debt set forth in the 1998 Balance Sheet.
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25
SECTION 3.27. Warranties: Warranty Claims. (a) Except as set
forth in Section 3.27(a) of the Disclosure Schedule, and except for warranties
implied by law, in the conduct of their respective businesses neither the
Company nor any of its subsidiaries makes any written representation or warranty
to their respective customers with respect to products sold or services
delivered by it.
(b) Except as set forth in Section 3.27(b) of the Disclosure
Schedule, to the best knowledge of the Seller, there are no warranty claims
relating to products at any time sold or services at any time performed by the
Company or any of its subsidiaries pending or threatened, except for claims for
which adequate reserves have been provided in accordance with the accounting
practices described in Section 3.06 of the Disclosure Schedule.
SECTION 3.28. Compensation of Employees. Set forth on Section
3.28 of the Disclosure Schedule is an accurate and complete list showing the
names of all persons whose compensation from the Company or any of its
subsidiaries for the calendar year ended on December 31, 1998 exceeded an
annualized rate of $100,000, together with a statement of the full amount paid
or payable to each such person for services rendered during such calendar year.
SECTION 3.29. Assets. Subject to the approvals described in
Section 3.11 of the Disclosure Schedule, the Company either (i) owns, (ii)
leases or (iii) has a valid license to use all assets (including, but not
limited to, inventory, equipment, contract rights, Permits and Books and
Records) necessary to conduct the business of the Company as it is currently
being conducted in all material respects; provided, however that the
representation and warranty made in this Section 3.29 with respect to
Intellectual Property is made only to the best knowledge of the Seller and is
subject to the limitations and provisions of Section 3.22.
SECTION 3.30. Government Contracts. Except as set forth on
Section 3.30 of the Disclosure Schedule neither the Company nor any of its
subsidiaries:
(i) has any contracts with any agency or the Government of the
United States involving any information, technology or data which is
classified under Executive Order 12958 of April 17, 1995;
(ii) has any products or services (including research and
development) with respect to which it is a supplier, direct or, to the
best knowledge of Seller, indirect, to any of the military services of
the United States or the Department of Defense.
(iii) exports (a) products or technical data under validated
licenses or technical data under General license GTDR pursuant to the
U.S. Export Administration Regulations (15 CFR Parts 730 through 744)
or (b) defense articles and defense services under the International
Traffic in Arms Regulations (22 CFR Subchapter M): or
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26
(iv) has a Facility Security Clearance under the
Department of Defense Industrial Security Program.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller as
follows:
SECTION 4.01. Incorporation and Authority of the Purchaser.
The Purchaser is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
necessary corporate power and authority to enter into this Agreement, to carry
out its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by the Purchaser, the
performance by the Purchaser of its obligations hereunder and the consummation
by the Purchaser of the transactions contemplated hereby have been duly
authorized by all requisite corporate action on the part of the Purchaser. This
Agreement has been duly executed and delivered by the Purchaser, and (assuming
due authorization, execution and delivery by the Seller) constitutes a legal,
valid and binding obligation of the Purchaser enforceable against it in
accordance with its terms, subject to the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors'
rights generally and subject, as to enforceability, to the effect of general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
SECTION 4.02. No Conflict. Except as may result from any facts
or circumstances relating solely to the Seller, the execution, delivery and
performance of this Agreement by the Purchaser does not and will not: (a)
conflict with or violate the Certificate of Incorporation or By-laws (or other
similar applicable documents) of the Purchaser; (b) conflict with or violate any
Law or Governmental Order applicable to the Purchaser, except as would not,
individually or in the aggregate, have a material adverse effect on the ability
of the Purchaser to consummate, or delay the consummation of, the transactions
contemplated by this Agreement; or (c) result in any breach of, or constitute a
default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of any
Encumbrance on any of the assets or properties of the Purchaser pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument relating to such assets or properties to which the
Purchaser or any of its subsidiaries is a party or by which any of such assets
or properties is bound or affected, except as would not, individually or in the
aggregate, have a material adverse effect on the ability of the Purchaser to
consummate, or delay the consummation of, the transactions contemplated by this
Agreement.
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27
SECTION 4.03. Consents and Approvals. The execution and
delivery of this Agreement by the Purchaser do not, and the performance of this
Agreement by the Purchaser will not, require any consent, approval,
authorization or other action by, or filing with or notification to, any
governmental or regulatory authority, except (i) the notification and waiting
period requirements of the HSR Act, (ii) any approvals necessary under the
Exon-Florio Amendment, (iii) where failure to obtain such consent, approval,
authorization or action, or to make such filing or notification, would not
prevent or delay the Purchaser from performing any of its material obligations
under this Agreement and (iv) as may be necessary as a result of any facts or
circumstances relating solely to the Seller.
SECTION 4.04. Absence of Litigation. No Action is pending or,
to the knowledge of the Purchaser, threatened against the Purchaser which seeks
to delay or prevent the consummation of the transactions contemplated hereby or
which would be reasonably likely to materially and adversely affect or restrict
the Purchaser's ability to consummate the transactions contemplated hereby.
SECTION 4.05. Investment Purpose. The Purchaser is acquiring
the Class One Interests solely for the purpose of investment and not with a view
to, or for offer or sale in connection with, any distribution thereof.
SECTION 4.06. Financing. The Purchaser has all funds necessary
to consummate the transactions contemplated by this Agreement.
SECTION 4.07. Brokers. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Purchaser.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Closing. (a)
Unless the Purchaser otherwise agrees in writing and except as otherwise set
forth herein or in the Disclosure Schedule (including without limitation Section
5.01 thereof), between the date of this Agreement and the Closing Date, the
Seller will cause the Company and each of its subsidiaries to (i) conduct its
business only in the ordinary course consistent with past practice and (ii) use
reasonable efforts to preserve the current relationships of the Company and its
subsidiaries with its customers, suppliers, distributors, officers and other key
employees and other Persons with which the Company and each such subsidiary has
significant business relationships.
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28
(b) Except as expressly provided in this Agreement or the
Disclosure Schedule (including without limitation Section 5.01 thereof), between
the date of this Agreement and the Closing Date, the Seller will cause the
Company and each of its subsidiaries not to do any of the following without the
prior written consent of the Purchaser (which consent shall not be unreasonably
withheld):
(i) except in the ordinary course of business consistent with
past practice, create any Encumbrance of any kind on any properties or
assets (whether tangible or intangible) of the Company or any
subsidiary, other than (A) Permitted Encumbrances and (B) Encumbrances
that will be released at or prior to the Closing;
(ii) except in the ordinary course of business consistent with
past practice, (A) sell, assign, transfer, lease or otherwise dispose
of or agree to sell, assign, transfer, lease or otherwise dispose of
any of the fixed assets of the Company or any subsidiary or (B) cancel
any indebtedness owed to the Company, in the case of both (A) and (B)
above, having an aggregate value exceeding $50,000;
(iii) acquire (by merger, consolidation, or acquisition of
stock, interests or assets) any Person or division thereof;
(iv) except in the ordinary course of business consistent with
past practice, (A) incur any indebtedness for borrowed money, (B) issue
any debt securities or (C) assume, grant, guarantee or endorse, or make
any other accommodation arrangement making the Company or any
subsidiary responsible for, the Liabilities of any Person, in the case
of (A), (B) and (C) above, having an aggregate value exceeding $50,000;
(v) change any method of accounting or accounting practice
used by the Company, other than such changes as are (i) required by
GAAP or (ii) set forth on Section 3.06 of the Disclosure Schedule;
(vi) issue or sell any additional Interests or other equity
interests in, the Company, or securities convertible into or
exchangeable for such equity interests, or issue or grant any options,
warrants, calls, subscription rights or other rights of any kind to
acquire additional equity interests, or such securities;
(vii) amend the Company's Certificate of Formation or the
Limited Liability Company Agreement;
(viii) redeem any Interests;
(ix) (A) grant any increase, or announce any increase, in the
wages, salaries, compensation, bonuses, incentives, pension or other
benefits payable by the Company or any subsidiary to any of its
employees, including, without limitation, any increase or
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29
change pursuant to any Benefit Plan, or (B) establish or increase or
promise to increase any benefits under any Benefit Plan, in either case
except for ordinary increases consistent with past practices of the
Company;
(x) except for agreements, arrangements or transactions with
the Purchaser, enter into any new agreement, arrangement or transaction
between the Company and any of its Affiliates, provided, however, that
no provision of this Section 5.01(b)(x) shall restrict or prohibit the
Seller and its Affiliates from entering into agreements, arrangements
or transactions with the Company on a basis and terms in accordance
with past practice or pursuant to the provisions of Section 5.09;
(xi) enter into or materially amend any Material Contract
except in the ordinary course of business;
(xii) make any capital expenditure or commitment therefor in
excess of $20,000 individually or $50,000 in the aggregate;
(xiii) declare, pay or set aside any dividend or make any
distribution with respect to, or split, combine, redeem or reclassify,
purchase or otherwise acquire directly, or indirectly, any Interests;
(xiv) make any loans to any Person or Persons in an aggregate
amount in excess of $100,000;
(xv) make any tax election or settle and/or compromise any
material tax liability in amount in excess of $25,000;
(xvi) write-off as uncollectable any notes or accounts
receivable, except write-offs in the ordinary course of business
charged to applicable reserves, none of which individually or in the
aggregate is material to the Company or its subsidiaries;
(xvii) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of
liabilities reflected or reserved against in the 1998 Financial
Statements or incurred after October 31, 1998 in the ordinary course of
business consistent with past practice;
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30
(xviii) engage in any "layoff" or "plant closing" as defined
by WARN; or
(xix) agree to take any of the actions specified in this
Section 5.01(b).
(c) During the period from the date of this Agreement to the
Closing Date, the Seller shall cause the Company to confer on a regular and
frequent basis with one or more designated representatives of the Purchaser to
report material operational matters and to report the general status of ongoing
operations. The Seller shall cause the Company and each of its subsidiaries to
notify the Purchaser of any unexpected emergency and of any governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated), adjudicatory proceedings, budget meetings or
submissions involving any material property of the Company and each of its
subsidiaries, and to update the Purchaser as requested with respect to such
events and permit its representatives prompt access to all materials prepared in
connection therewith. Each of the Seller and the Purchaser covenants and agrees
to notify the other party if they become aware of any breach of the
representations and warranties contained herein prior to the Closing.
SECTION 5.02. Access to Information. From the date of this
Agreement until the Closing, upon reasonable notice, the Seller shall, and the
Seller shall cause the officers, employees, auditors and agents of the Company
and each of its subsidiaries to, (a) afford the officers, employees and
authorized agents and representatives of the Purchaser reasonable access, during
normal business hours, to the offices, properties, Books and Records of the
Company and each such subsidiary and (b) furnish to the officers, employees and
authorized agents and representatives of the Purchaser such additional financial
and operating data and other information regarding the assets (including the
Seller's basis therein), properties, goodwill and business of the Company and
each such subsidiary as the Purchaser may from time to time reasonably request;
provided, however, that the Purchaser shall not unreasonably interfere with any
of the businesses or operations of the Company or any of its subsidiaries.
SECTION 5.03. Confidentiality. Each party hereto shall comply
in all respects with Section 19.11 of the Limited Liability Company Agreement,
relating to confidentiality.
SECTION 5.04. Regulatory and Other Authorizations; Releases;
Consents. (a) Each party hereto shall use its best efforts to obtain all
authorizations, consents, orders, permits, licenses and approvals of, and to
give all notices to and make all filings with, all Governmental Authorities and
other third parties that may be or become necessary for its execution and
delivery of, and the performance of its obligations pursuant to, this Agreement
and will cooperate fully with the other parties in promptly seeking to obtain
all such authorizations, consents, orders and approvals, giving such notices,
and making such filings. Each party hereto agrees to make, or cause to be made,
an appropriate filing of a Notification and Report Form pursuant to the HSR Act
with respect to the transactions contemplated hereby
<PAGE>
31
within five (5) Business Days of the date hereof and to supply promptly any
additional information and documentary material that may be requested pursuant
to the HSR Act. The parties hereto agree not to take any action that will have
the effect of unreasonably delaying, impairing or impeding the receipt of any
required authorizations, consents, orders or approvals.
(b) Without limiting the generality of the parties'
undertakings pursuant to Section 5.04(a), each of the parties hereto shall use
all reasonable efforts to (i) respond to any inquiries by any Governmental
Authority regarding antitrust or other matters with respect to the transactions
contemplated by this Agreement, (ii) avoid the imposition of any order or the
taking of any action that would restrain, alter or enjoin the transactions
contemplated by this Agreement and (iii) in the event any Governmental Order
adversely affecting the ability of the parties to consummate the transactions
contemplated by this Agreement has been issued, to have such Governmental Order
vacated or lifted.
(c) Intentionally Omitted.
(d) The Purchaser will use its best efforts to assist the
Seller in obtaining any consents of landlords necessary or advisable in
connection with the transactions contemplated by this Agreement, including,
without limitation, (i) providing to such landlords (A) guarantees by the
Purchaser of the obligations of the Company under the Leases; provided, however,
that any such guarantee will be made jointly by the Purchaser and the Seller and
will be apportioned based upon the percentage interest in the Company held by
such party and its Affiliates, and (B) such financial statements and other
financial information with respect to the Purchaser as such landlords may
reasonably request and (ii) agreeing to such adjustments to the terms of the
Leases as would not, in the aggregate, have a Material Adverse Effect.
SECTION 5.05. Projections. In connection with the Purchaser's
investigation of the Company, its subsidiaries and their business, the Purchaser
has received from the Seller certain projections and other forecasts for the
Company and certain plan and budget information. The Purchaser acknowledges that
there are uncertainties inherent in attempting to make such projections,
forecasts, plans and budgets, that the Purchaser is familiar with such
uncertainties, that the Purchaser is taking full responsibility for making its
own evaluation of the adequacy and accuracy of all estimates, projections,
forecasts, plans and budgets so furnished to it, and that, other than with
respect to the adjustments set forth in Section 2.04, the Purchaser will not
assert any claim against the Seller or any of its agents, consultants, counsel,
accountants, investment bankers or representatives, or hold the Seller or any
such persons liable, with respect thereto. Accordingly, the Seller makes no
representation or warranty with respect to any estimates, projections,
forecasts, plans or budgets referred to in this Section 5.05.
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32
SECTION 5.06. Non-Competition. Each party hereto shall comply
in all respects with Section 19.3 of the Limited Liability Company Agreement
relating to non-competition.
SECTION 5.07. No Solicitation of Employees. Each of the Seller
and the Purchaser agrees that it shall not, during the period from the date
hereof until the Closing Date and, if the Closing occurs, for a period of four
(4) years from the Closing Date, without the prior written consent of the other
party hereto, directly or indirectly, solicit on a specific or targeted basis
for employment or employ any person who is, at the time of such hiring or
solicitation, an employee of the Company, provided that this Section 5.07 shall
not prohibit any form of employment advertising or prevent the hiring of any
individual who contacts the Seller or the Purchaser after terminating his or her
employment with the Company.
SECTION 5.08. Further Action. Subject to the terms and
conditions herein provided, each of the parties hereto covenants and agrees to
use its best efforts to deliver or cause to be delivered such documents and
other papers and to take or cause to be taken such further actions as may be
necessary, proper or advisable under applicable Laws to consummate and make
effective the transactions contemplated hereby.
SECTION 5.09. Transitional Services. For a period of 180 days
from the Closing Date, the Seller shall supply the administrative services
listed in Section 5.09 of the Disclosure Schedule as the Company shall request,
on terms and conditions substantially similar to those upon which the Company
has received such services prior to the Closing Date. Thereafter such services
shall only be provided pursuant to a Transitional Services Agreement to be
negotiated between the Company and the Seller. The Seller shall permit the
Company to use its name, logo, trademarks and Federal Aviation Administration
permits in the name of the Seller to the extent necessary (i) to allow for the
sale of existing inventory and (ii) to permit the Company to effectively service
products previously sold bearing the Seller's name, logo or trademark.
SECTION 5.10. Conveyance Taxes. The Seller and the Purchaser
agree that each shall pay one-half of all sales, use, transfer, stamp, stock
transfer, real property transfer or gains and similar taxes incurred as a result
of the sale of the Class One Interests contemplated hereby.
SECTION 5.11. Exclusive Dealing. During the period from the
date of this Agreement to the earlier of the Closing Date or the date this
Agreement is terminated in accordance with its terms, the Seller shall not, and
shall cause the Company and the respective Affiliates, officers, shareholders,
directors, employees, agents, representatives, consultants, financial advisors,
attorneys, accountants, or other agents of the Company and the Seller to refrain
from taking any action to, directly or indirectly, encourage, initiate, solicit
or engage in discussions or negotiations with, or provide any information to,
any Person, other than the
<PAGE>
33
Purchaser (and it Affiliates and representatives), concerning any purchase of
the Interests or any merger, sale of substantial assets or similar transaction
involving the Company.
SECTION 5.12. Financial Statements. The Seller shall cause the
Company to prepare its financial statements for the fiscal year ended February
28, 1999 in a manner consistent with, and reflecting the implementation of, the
accounting procedures of the Purchaser.
SECTION 5.13. Transfer of Contracts. In the case of (i) any
Material Contracts or Permits which are not transferred or assigned to the
Company prior to the Closing Date and (ii) all consents, approvals and waivers
described in Section 3.11 of the Disclosure Schedule, the Seller agrees to use
its reasonable best efforts (at no cost or expense to the Company) to obtain, or
cause to be obtained (i) the assignment or transfer, as the case may be, of all
such Material Contracts and Permits and (ii) all consents, approvals and waivers
described in Section 3.11 of the Disclosure Schedule; provided, however, that if
the Seller is unable to effect any of the foregoing, the Seller shall act as the
Company's agent in (i) the performance, if any, of any obligations and
liabilities and (ii) the receipt of any benefits, rights or interests which
inure to the Seller, in each case, with respect to and under any Material
Contract, Permit or item listed in Section 3.11 of the Disclosure Schedule. The
Purchaser and the Seller covenant and agree that if in connection with any such
transfer or assignment, a guarantee of the Company's obligations is required by
the other party to such Material Contract or Permit, any such guarantee will be
made jointly by the Purchaser and the Seller and will be apportioned based on
the percentage interest in the Company held by such Person and its Affiliates.
SECTION 5.14. Transfer of Intellectual Property. (a) The
Seller shall use its reasonable best efforts effectively to transfer to the
Company prior to the Closing Date all Company Intellectual Property which is
owned by the Seller and its Affiliates and used exclusively by the Company and
its subsidiaries.
(b) In the event the transfers referred to in clause (a) above
cannot be completed prior to the Closing Date, the Seller shall provide to the
Company a world-wide, royalty-free, perpetual license to use such Company
Intellectual Property in its business, which license shall be granted prior to
the Closing Date, and will continue after the Closing Date to use reasonable
best efforts to complete such transfers.
(c) The Seller shall provide to the Company a world-wide,
non-exclusive, royalty-free, perpetual license to use all Company Intellectual
Property which is not used exclusively by the Company or its subsidiaries.
<PAGE>
34
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.01. Employee Benefit Plans. (a) On and after the
Closing, the Benefit Plans in effect as of the Closing shall, subject to
applicable law, the terms of this Agreement and the terms of such Benefit Plans,
remain in effect until such time as the Company adopts new employee benefit
plans and arrangements for the benefit of employees of the Company.
Notwithstanding the foregoing and except as otherwise provided in the applicable
Benefit Plan, the Purchaser shall cause the employee benefit plans and
arrangements maintained for current employees of the Company following the
Closing to provide, through the first anniversary of the Closing, a level of
compensation and benefits that is substantially comparable in the aggregate to
that provided under the Benefit Plans as in effect immediately prior to the date
of this Agreement; provided, however, that changes may be made to such plans and
arrangements to the extent necessary to comply with applicable law ; provided
further, that nothing contained herein shall require the Purchaser to cause the
Company to provide any employee stock option plan or similar plan, including,
without limitation, any employee benefit plan or arrangement as a substitute for
(i) the BE Aerospace, Inc. 1994 Employee Stock Purchase Plan (the "Stock
Purchase Plan") and (ii) the BE Aerospace, Inc. 1996 Stock Option Plan (the
"Stock Option Plan"). On and after the Closing, the Purchaser shall cause the
Company to assume, in accordance with their terms, the agreements dated October
20, 1998 and November 11, 1998 between BE Aerospace, Inc. and Carl Worley and
Arthur Lipton, respectively. On and after the Closing, the Seller shall retain
all liabilities with respect to any agreements or arrangements between the
Seller and Scott Smith.
(b) The Seller shall cause employees of the Company who have
been granted options under the Stock Option Plan (i) to continue to vest in such
options based upon their continued employment with the Company afer the Closing
as if they had continued employment with the Seller or one of its subsidiaries,
and (ii) not to be deemed to have terminated service with the Seller and its
subsidiaries for purposes of the Stock Option Plan as a result of the execution
of this Agreement and the consummation of the transactions contemplated hereby.
Upon any such employee's termination of employment with the Company after the
Closing for any reason, the Seller shall cause such employee to have the benefit
of any provisions contained in the Stock Option Plan which allow for the
exercise of options granted thereunder afer termination of employment in the
same manner as if such employee had terminated employment with the Seller. To
the extent permitted by applicable law, the Seller shall take all actions which
are reasonable and necessary, including, without limitation, the adoption of
amendments to the Stock Option Plan, to effectuate the covenants contained in
this subsection (b).
(c) The Seller shall allow employees of the Company who would
otherwise be entitled to purchase common stock of the Seller under the Stock
Purchase Plan on February 26, 1999 to be entitled to effect such purchases no
later than the day prior to the Closing Date. To the extent permitted by
applicable law, the Seller shall take all actions which are reasonable and
<PAGE>
35
necessary, including, without limitation, the adoption of amendments to the
Stock Purchase Plan and the making of proper and timely communications to
affected employees, to effectuate the covenants contained in this subsection
(c). After the Closing, employees of the Company shall not be entitled to effect
any further additional purchases of common stock of the Seller under the Stock
Purchase Plan.
(d) To the extent permitted by law, the Seller shall take any
actions which are reasonable and necessary, including, without limitation, the
adoption of amendments to the BE Aerospace, Inc. Supplemental Executive
Retirement Plan, the BE Aerospace, Inc. Supplemental Executive Deferred
Compensation Plan (SEDCP) Plan II and the BE Aerospace, Inc. Supplemental
Executive Deferred Compensation Plan (SEDCP) Plan III (collectively, "Seller's
SERPs"), to ensure that employees of the Company who participate in one or more
of Seller's SERPs shall not be entitled to distributions of their benefits under
Seller's SERPs solely as a result of the execution of this Agreement and the
consummation of the transactions contemplated hereby, and that such employees
shall be entitled to distributions of their benefits under Seller's SERPs upon
their termination of employment with the Company and its Affiliates.
(e) If the Company establishes a tax-qualified 401(k) savings
plan (the "Company's 401(k) Plan") in replacement of the BE Aerospace, Inc.
Savings Plan ("Seller's 401(k) Plan"), the Seller shall as soon as
administratively practical, upon the Purchaser's request, (i) provide the
Purchaser with such evidence as the Purchaser may reasonably request to ensure
that Seller's 401(k) Plan is qualified under Section 401(a) of the Code, and
(ii) take any and all actions reasonable and necessary to cause that portion of
the assets and corresponding benefit liabilities under Seller's 401(k) Plan
allocable to both the vested and unvested account balances of employees of the
Company and their beneficiaries under Seller's 401(k) Plan, to be transferred,
in cash or other property reasonably acceptable to the Purchaser, from the trust
under Seller's 401(k) Plan to a trust under the Company's 401(k) Plan. The
amount of assets to be transferred pursuant to the preceding sentence shall be
subject to the Purchaser's and the Seller's review and confirmation, and shall
be determined in conformance with Section 414(l) of the Code.
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36
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.01. Conditions to Obligations of the Seller. The
obligations of the Seller to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment or waiver, at or prior to the
Closing, of each of the following conditions:
(a) Representations and Warranties; Covenants. (i) The
representations and warranties of the Purchaser contained in this
Agreement shall be true and correct in all material respects as of the
Closing, with the same force and effect as if made as of the Closing
Date, other than such representations and warranties as are made as of
another date, which shall be true and correct as of such date
(provided, however, that if any portion of any representation or
warranty is already qualified by materiality, for purposes of
determining whether this Section 7.01(a) has been satisfied with
respect to such portion of such representation or warranty, such
portion of such representation or warranty as so qualified must be true
and correct in all respects), (ii) the covenants and agreements
contained in this Agreement to be complied with by the Purchaser at or
prior to the Closing shall have been complied with in all material
respects; and (iii) the Seller shall have received a certificate of the
Purchaser as to the matters set forth in clauses (i) and (ii) above
signed by a duly authorized officer of the Purchaser.
(b) HSR Act. Any waiting period (and any extension thereof)
under the HSR Act applicable to the purchase of the Class One Interests
contemplated hereby shall have expired or shall have been terminated.
(c) No Order. No Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any Governmental Order which
is in effect and has the effect of making the transactions contemplated
by this Agreement illegal or otherwise prohibiting consummation of such
transactions.
(d) Intentionally Omitted.
(e) Limited Liability Company Agreement. The Purchaser shall
have become a Member of the Company by becoming a party to the Limited
Liability Company Agreement in substantially the form of Exhibit A
hereto.
(f) Exon-Florio. All governmental approvals and consents,
implied or otherwise required to be obtained under the Exon-Florio
Amendment shall have been obtained or the applicable time period
thereunder shall have expired (which approvals and consents shall not
impose any burdens or restrictions on the Seller or any of its
<PAGE>
37
Affiliates which would have a material adverse effect on the Company or the
ability of the Seller to participate in the control or management of the
Company).
(g) Guaranty. The Guarantor shall have executed and delivered
the Guaranty substantially in the form of Exhibit 1.01(b) hereto.
(h) Bank Letter. The Purchaser shall have delivered to the
Seller a letter from a commercial bank having assets of at least $50
billion, in the form attached hereto as Exhibit 7.01(h).
SECTION 7.02. Conditions to Obligations of the Purchaser. The
obligations of the Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment or waiver, at or prior to the
Closing, of each of the following conditions:
(a) Representations and Warranties; Covenants. (i) The
representations and warranties of the Seller contained in this
Agreement shall be true and correct in all material respects as of the
Closing, with the same force and effect as if made as of the Closing
Date, other than such representations and warranties as are made as of
another date, which shall be true and correct as of such date
(provided, however, that if any portion of any representation or
warranty is already qualified by materiality, for purposes of
determining whether this Section 7.02(a) has been satisfied with
respect to such portion of such representation or warranty, such
portion of such representation or warranty as so qualified must be true
and correct in all respects); (ii) the covenants and agreements
contained in this Agreement to be complied with the Seller at or prior
to the Closing shall have been complied with in all material respects;
and (iii) the Purchaser shall have received a certificate of the Seller
as to the matters set forth in clauses (i) and (ii) above signed by an
officer of the Seller.
(b) HSR Act. Any waiting period (and any extension thereof)
under the HSR Act applicable to the purchase of the Class One Interests
contemplated hereby shall have expired or shall have been terminated.
(c) No Order. No Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other Governmental Order which is in effect and has the
effect of making the transactions contemplated by this Agreement
illegal or otherwise prohibiting consummation of such transactions.
(d) Good Standing and Other Certificates. The Seller shall
have delivered to the Purchaser (i) a certificate from the Secretary of
State or other appropriate official of
<PAGE>
38
the Company to the effect that the Company is in good standing or
subsisting in the jurisdiction of its organization, (ii) a certificate
from the Secretary of State or other appropriate official in each State
in which the Company is qualified to do business to the effect that the
Company is in good standing in such State and (iii) a certificate as to
the tax status of the Company from the appropriate official in Delaware
and each state in which the Company is qualified to do business.
(e) Approvals. All governmental and third party consents,
waivers and approvals, if any, listed on Section 7.02(e) of the
Disclosure Schedule shall have been received.
(f) Bank Letter. The Seller shall have delivered to the
Purchaser a letter from a commercial bank having assets of at least $50
billion, in the form attached hereto as Exhibit 7.02(f).
(g) Exon-Florio. All governmental approvals and consents,
implied or otherwise required to be obtained under the Exon-Florio
Amendment shall have been obtained or the applicable time period
thereunder shall have expired (which approvals and consents shall not
impose any burdens or restrictions on the Purchaser or any of its
Affiliates which would have a material adverse effect on the Company or
the ability of the Purchaser to control or manage the Company).
(h) Release of Chase Guarantee. The guarantee by the Company
of the Seller's obligations under the Seller's credit facility with The
Chase Manhattan Bank and the security interest in the assets of the
Company in favor of The Chase Manhattan Bank shall have each been
unconditionally released.
(i) Harris Waiver. Harris Corporation ("Harris") shall have
waived in writing its rights to purchase the Company's membership
interests in B/E Harris Live TV, LLC under the Limited Liability
Company Agreement dated as of February 10, 1998 among the Company,
Harris and In-Flight Phone Corporation to the extent such rights are
triggered by the transactions contemplated by this Agreement.
(j) Change in Accounting. The Seller shall have caused the
Company to change its method of accounting in a manner consistent with
Section 3.06 of the Disclosure Schedule.
(k) Change in Fiscal Year. The Seller shall have caused the
Company's fiscal year to be changed so that it ends on December 31 of
each year.
(l) ACCTV Assets. All assets (including, but not limited to,
all Intellectual Property, inventory, equipment, contract rights,
Permits and Books and Records)
<PAGE>
39
necessary to manufacture and sell any products related to the ACCTV
Business as conducted by the Company prior to the date hereof shall
have been transferred free and clear of all Encumbrances, other than
Permitted Encumbrances, to the Company.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Survival. Subject to the limitations and other
provisions of this Agreement, the representations, warranties, covenants and
agreements of the parties hereto contained herein shall survive the Closing and
shall remain in full force and effect, regardless of any investigation made by
or on behalf of the Seller or the Purchaser, for a period extending from the
Closing Date until the earlier of March 31, 2000 and the date of the completion
by the Company's auditors of the audit for the fiscal year ending December 31,
1999; provided, however, that the representations and warranties set forth in
Section 3.15 and covenant set forth in Section 5.10 shall survive until the
expiration of the applicable statute of limitations for the Tax in question, the
representations and warranties set forth in Section 3.20 shall survive for a
period of four (4) years, the representations and warranties set forth in the
last sentence of Section 3.03 shall survive until the expiration of the
applicable statute of limitations; and the covenants and agreements set forth in
Sections 2.04, 5.03, 5.05, 5.06, 5.07, 5.08, 5.09, 5.10, 5.11, 5.12, 5.13, and
5.14 and Articles VI, VIII and X shall remain in full force and effect for the
applicable periods specified in the respective Sections or Articles or, if no
such period is specified, until the expiration of the applicable statute of
limitations.
SECTION 8.02. Indemnification by the Purchaser. (a) The
Purchaser agrees, subject to the other terms and conditions of this Agreement
and on an after Tax basis, to indemnify the Seller and its agents, successors
and assigns (as used in this Section 8.02, each a "Seller Indemnified Party")
against and hold each Seller Indemnified Party harmless from all Losses arising
out of (i) the breach of any representation or warranty contained in Article IV
and (ii) the breach of any covenant or agreement of the Purchaser herein.
Anything in Section 8.01 to the contrary notwithstanding, no claim may be
asserted nor may any action be commenced against the Purchaser for breach of any
representation, warranty, covenant or agreement contained herein, unless written
notice of such claim or action is received by the Purchaser describing in detail
the facts and circumstances with respect to the subject matter of such claim or
action on or prior to the date on which the representation, warranty, covenant
or agreement on which such claim or action is based ceases to survive as set
forth in Section 8.01, irrespective of whether the subject matter of such claim
or action shall have occurred before or after such date.
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(b) The indemnification obligations of the Purchaser pursuant
to Section 8.02(a)(i) shall not be effective until the aggregate dollar amount
of all Losses which would otherwise be indemnifiable pursuant to Section
8.02(a)(i) exceeds $500,000 (the "Purchaser's Threshold Amount"), in which event
such claims shall be indemnifiable from the first dollar thereof. In addition,
no claim may be made against the Purchaser for indemnification pursuant to
Section 8.02(a)(i) with respect to any individual item (or aggregation of
similar items) of Loss, unless such item (or aggregation of similar items)
exceeds $10,000, nor shall any such item (or aggregation of similar items) which
does not exceed $10,000 be applied to or considered part of the Purchaser's
Threshold Amount. The indemnification obligations of the Purchaser pursuant to
Section 8.02(a)(i) shall be effective only until the dollar amount paid in
respect of all Losses indemnified against under Section 8.02(a)(i) aggregates to
an amount equal to $15,000,000. For the purposes of this Section 8.02(b), in
computing such individual or aggregate amounts of claims, the amount of each
claim shall be deemed to be an amount (i) net of any Tax benefit actually
realized by the Seller Indemnified Party making such claim on or prior to the
date of an indemnification payment under this Section 8.02 and (ii) net of any
insurance proceeds and any indemnity, contribution or other similar payment
actually recovered by the Seller Indemnified Party making such claim from any
third party with respect thereto (on an after tax basis).
(c) Payments by the Purchaser to any Seller Indemnified Party
pursuant to Section 8.02(a) shall be limited to the amount of any Losses that
remains after deducting therefrom (i) any Tax benefit actually realized by such
Seller Indemnified Party on or prior to the date of an indemnification payment
under this Section 8.02 and (ii) any insurance proceeds and any indemnity,
contribution or other similar payment actually recovered by such Seller
Indemnified Party from any third party with respect thereto (on an after tax
basis). If a payment is made by the Purchaser to any Seller Indemnified Party in
accordance with this Section 8.02, and if a Tax benefit subsequently is actually
realized by such Seller Indemnified Party or any Affiliate of such Seller
Indemnified Party (that was not previously taken into account to reduce an
amount otherwise payable by the Purchaser to such Seller Indemnified Party under
this Section 8.02), such Seller Indemnified Party shall promptly pay to the
Purchaser at the time of such realization the amount of such Tax benefit to the
extent that such amount would have resulted in a reduction in an obligation of
the Purchaser under Section 8.02 if the Tax benefit had been obtained at the
time that such obligation was satisfied.
SECTION 8.03. Indemnification by the Seller. (a) The Seller
agrees, subject to the other terms and conditions of this Agreement and on an
after Tax basis, to indemnify the Purchaser and its Affiliates (including,
without limitation, the Company) (as used in this Section 8.03, each a
"Purchaser Indemnified Party") against and hold each Purchaser Indemnified Party
harmless from all Losses arising out of (i) the breach of any representation or
warranty of the Seller contained in Article III, (ii) the breach by the Seller
of any covenant or agreement of the Seller contained herein, (iii) the actions
taken by the Company prior to the Closing Date and described in Section 3.20 of
the Disclosure Schedule and (iv) Taxes imposed
<PAGE>
41
on or with respect to the income, assets, or operations of the Company and its
subsidiaries for taxable periods (or portions thereof) ending on or prior to the
Closing Date to the extent such Taxes were required to have been paid to the
appropriate taxing authority prior to the Closing Date. Anything in Section 8.01
to the contrary notwithstanding, no claim may be asserted nor any action
commenced against the Seller for breach of any representation, warranty,
covenant or agreement contained herein, unless written notice of such claim or
action is received by the Seller describing in detail the facts and
circumstances with respect to the subject matter of such claim or action within
thirty days after the date on which the representation, warranty, covenant or
agreement on which such claim or action is based ceases to survive as set forth
in Section 8.01, irrespective of whether the subject matter of such claim or
action shall have occurred before or after such date.
(b) The indemnification obligations of the Seller pursuant to
Section 8.03(a)(i) shall not be effective until the aggregate dollar amount of
all Losses which would otherwise be indemnifiable pursuant to Section 8.03(a)(i)
exceeds $500,000 (the "Seller's Threshold Amount"), in which event such claims
shall be indemnifiable from the first dollar thereof. In addition, no claim may
be made against the Seller for indemnification pursuant to Section 8.03(a)(i)
with respect to any individual item of Loss (or aggregation of similar items),
unless such item (or aggregation of similar items) exceeds $10,000, nor shall
any such item (or aggregation of similar items) which does not exceed $10,000 be
applied to or considered part of the Seller's Threshold Amount. The
indemnification obligations of the Seller pursuant to Section 8.03(a)(i) shall
be effective only until the dollar amount paid by the Seller in respect of all
Losses indemnified against under Section 8.03(a)(i) aggregates to an amount
equal to $15,000,000, provided, however, that with respect to claims relating to
the representations and warranties contained in the last sentence of Section
3.03 and in Section 3.15 and the covenant set forth in Section 5.10 only, the
indemnification obligations shall be effective until the dollar amount paid in
respect of all Losses aggregates to an amount equal to the Purchase Price, as
adjusted pursuant to Section 2.04, provided, that in no event shall the
Purchaser be required to return any indemnification amount previously received
if the Purchase Price is reduced pursuant to Section 2.04 after such payment has
been made to any Purchaser Indemnified Party. For the purposes of this Section
8.03(b), in computing such individual or aggregate amounts of claims, the amount
of each claim shall be deemed to be an amount (i) net of any Tax benefit
actually realized on or prior to the date of an indemnification payment under
this Section 8.03, and (ii) net of any insurance proceeds and any indemnity,
contribution or other similar payment actually recovered by any Purchaser
Indemnified Party from any third party with respect thereto (on an after tax
basis).
(c) Payments by the Seller pursuant to Section 8.03(a) shall
be limited to the amount of any Losses that remains after deducting therefrom
(i) any Tax benefit actually realized on or prior to the date of an
indemnification payment under this Section 8.03, by such Purchaser Indemnified
Party and (ii) any insurance proceeds and any indemnity, contribution or other
similar payment actually recovered by any Purchaser Indemnified Party from any
<PAGE>
42
third party with respect thereto (on an after-tax basis). If a payment is made
by the Seller in accordance with this Section 8.03, and if a Tax benefit
subsequently is actually realized by such Purchaser Indemnified Party or any
Affiliate of any Purchaser Indemnified Party (that was not previously taken into
account to reduce an amount otherwise payable by the Seller to such Purchaser
Indemnified Party under this Section 8.03), the Purchaser shall promptly pay to
the Seller at the time of such realization, the amount of such Tax benefit to
the extent that such amount would have resulted in a reduction in an obligation
of the Seller under this Section 8.03 if the Tax benefit had been obtained at
the time that such obligation was satisfied.
SECTION 8.04. Indemnification Procedures. (a) A Seller
Indemnified Party or a Purchaser Indemnified Party, as the case may be (for
purposes of this Section 8.04, an "Indemnified Party"), shall give the
indemnifying party under Section 8.02 or 8.03, as applicable (for purposes of
this Section 8.04, an "Indemnifying Party"), prompt written notice of any claim,
assertion, event or proceeding by or in respect of a third party as to which it
may request indemnification hereunder or as to which the Seller's Threshold
Amount or the Purchaser's Threshold Amount, as applicable, may be applied as
soon as is practicable and in any event within 45 days of the time that such
Indemnified Party learns of such claim, assertion, event or proceeding;
provided, that the failure to so notify the Indemnifying Party shall not affect
rights to indemnification hereunder except to the extent that the Indemnifying
Party is actually prejudiced by such failure. The Indemnifying Party shall have
the right to direct, through counsel of its own choosing, the defense or
settlement of any such claim or proceeding at its own expense; provided,
however, that the Indemnifying Party shall not, without the prior written
consent of the Indemnified Party (which consent shall not be unreasonably
withheld), enter into any settlement or otherwise compromise any such claim or
proceeding that relates to Taxes if such settlement or compromise may adversely
affect the Tax liability of the Indemnified Party or the Company, or any
Affiliate of either of the foregoing, for any taxable period. With respect to
such claims or proceedings relating to Taxes, the Indemnifying Party shall allow
the Indemnified Party to reasonably request updates regarding developments that
may be relevant to the Taxes of the Company or the Indemnified Party, and shall
allow the Indemnified Party to provide comments regarding the direction of such
claim or proceeding (which comments, subject to the foregoing consent
requirements with respect to settlements or compromises, the Indemnifying Party
will be free to accept or reject in its sole discretion). If the Indemnifying
Party elects to assume the defense of any such claim or proceeding, the
Indemnified Party may participate in such defense, but in such case the expenses
of such Indemnified Party shall be paid by such Indemnified Party. Such
Indemnified Party shall provide the Indemnifying Party with access to its
records and personnel relating to any such claim, assertion, event or proceeding
during normal business hours and shall otherwise cooperate with the Indemnifying
Party in the defense or settlement thereof, and the Indemnifying Party shall
reimburse such Indemnified Party for all its reasonable out-of-pocket expenses
in connection therewith. If the Indemnifying Party elects to direct the defense
of any such claim or proceeding, such Indemnified Party shall not pay, or permit
to be paid, any part of any claim or demand arising from such asserted
liability, unless the Indemnifying Party
<PAGE>
43
consents in writing to such payment or unless the Indemnifying Party, subject to
the last sentence of this Section 8.04(a), withdraws from the defense of such
asserted liability, or unless a final judgment from which no appeal may be taken
by or on behalf of the Indemnifying Party is entered against such Indemnified
Party for such liability. If the Indemnifying Party shall fail to defend against
such claim or proceeding, or if, after commencing or undertaking any such
defense, the Indemnifying Party fails to prosecute or withdraws from such
defense, such Indemnified Party shall have the right to undertake the defense or
settlement thereof, at the Indemnifying Party's expense. If such Indemnified
Party assumes the defense of any such claim or proceeding pursuant to this
Section 8.04(a) and proposes to settle such claim or proceeding prior to a final
judgment thereon or to forego appeal with respect thereto, then such Indemnified
Party shall give the Indemnifying Party prompt written notice thereof and the
Indemnifying Party shall have the right to participate in the settlement or
assume or reassume the defense of such claim or proceeding.
(b) Each party hereto hereby acknowledges and agrees that from
and after the Closing, its sole and exclusive remedy with respect to any and all
claims relating to the representations and warranties contained in Article III
and Article IV and the covenants contained in this Agreement to be performed
prior to the Closing shall be pursuant to the indemnification provisions set
forth in this Article VIII. In furtherance of the foregoing, each party hereto
hereby waives, to the fullest extent permitted under applicable law, any and all
other rights, claims and causes of action it may have, from and after the
Closing, against the other parties hereto or its officers, directors, employees,
agents, representatives and Affiliates relating thereto.
(c) Except as set forth in this Agreement, the parties hereto
are not making any representation, warranty, covenant or agreement with respect
to the matters contained herein. Notwithstanding anything to the contrary
contained in this Agreement, no breach of any representation, warranty, covenant
or agreement contained herein shall give rise to any right on the part of any
party hereto, after the consummation of the purchase and sale of the Class One
Interests contemplated by this Agreement, to rescind this Agreement or any of
the transactions contemplated hereby.
(d) Notwithstanding anything to the contrary contained in this
Agreement, no party hereto shall have any liability under any provision of this
Agreement for, and in no event shall the Purchaser's Threshold Amount or the
Seller's Threshold Amount, as the case may be, be applied to, any consequential
damages. Each party hereto shall take all reasonable steps to mitigate its
Losses upon and after becoming aware of any event which could reasonably be
expected to give rise to any Losses.
(e) For purposes of Sections 8.02 and 8.03, a Tax benefit
shall be considered realized in the taxable year in which the Taxes of an
Indemnified Party are reduced as a result of any deduction, loss, credit,
allowance or similar item that relates to a claim or action for which an
<PAGE>
44
indemnification payment was made by an Indemnifying Party under this Agreement
(it being understood that no Indemnifying Party shall forgo any Tax Benefit to
which it is properly entitled). Prior to the time that any indemnification
payment is made under this Article VIII, and thereafter on a quarterly basis (on
January 15, April 15, July 15 and October 15 of each calendar year), the
Indemnified Party shall provide the Indemnifying Party with a certificate of an
internationally-recognized independent accounting firm, signed by a duly
authorized member of such firm and providing such firm's determination of the
amount that may be taken into account under Sections 8.02 or 8.03, as the case
may be, as the Tax benefits of the Indemnified Party that are actually realized;
it being understood that if the foregoing certificate is to be provided by the
Purchaser, such certificate shall be provided by Mazars & Guerard or such other
internationally-recognized independent accounting firm chosen by the Purchaser,
and if such certificate is to be provided by the Seller, such certificate shall
be provided by Deloitte & Touche, LLP or such other internationally-recognized
independent accounting firm chosen by the Seller; provided, however, that if the
Indemnifying Party objects to the determination set forth in the certificate,
the matter shall be submitted to an internationally-recognized independent
accounting firm mutually acceptable to the parties, whose determination of the
Tax benefits actually realized by an Indemnified Party shall be final and
binding (and whose fees shall be paid by the Indemnifying Party); it being
further understood that the Indemnified Party shall not be obligated to disclose
and no accounting firm providing the above-described certificate shall disclose
to the Indemnifying Party any information relating to the income or operations
of the Indemnified Party or its Affiliates or any other information relating to
any Returns of such Indemnified Party.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01. Termination. This Agreement may be terminated at
any time prior to the Closing:
(a) by the mutual written consent of the Seller and the
Purchaser;
(b) by either the Seller or the Purchaser, if any Governmental
Authority with jurisdiction over such matters shall have issued a
Governmental Order restraining, enjoining or otherwise prohibiting the
sale of the Class One Interests hereunder and such order, decree,
ruling or other action shall have become final and unappealable;
provided, that the provisions of this Section 9.01(b) shall not be
available to any party unless such party shall have complied with its
obligations under Section 5.04 or otherwise used its best efforts to
oppose any such Governmental Order or to have such Governmental Order
vacated or made inapplicable to the transactions contemplated by this
Agreement; or
(c) by either the Seller or the Purchaser, if the Closing
shall not have occurred on or prior to February 26, 1999; provided,
however, that the right to terminate this Agreement under this Section
9.01(c) shall not be available to any party
<PAGE>
45
whose failure to fulfill any obligation under this Agreement shall have
been the cause of, or shall have resulted in, the failure of the
Closing to occur prior to such date.
For purposes of Section 9.01(c) only, time shall be of the
essence, provided, however, nothing contained in this provision shall have the
effect of requiring the Purchaser or the Seller to waive any of its rights, or
relieving either the Purchaser or the Seller of any of its obligations, under
this Agreement.
SECTION 9.02. Effect of Termination. In the event of
termination of this Agreement as provided in Section 9.01, this Agreement shall
forthwith become void and there shall be no liability on the part of any party
hereto except (a) as set forth in Section 5.03 and Section 10.01 and (b) that
nothing herein shall relieve either party from liability for any willful breach
hereof.
SECTION 9.03. Waiver. At any time prior to the Closing, either
party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any inaccuracies
in the representations and warranties made to such party herein or in any
document delivered pursuant hereto or (c) waive compliance with any of the
agreements or conditions contained herein. Any such extension or waiver shall be
valid only if set forth in an instrument in writing signed by the party to be
bound thereby.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Expenses. (a) Except as otherwise provided in
this Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses, whether or not the Closing
shall have occurred.
(b) Notwithstanding the foregoing, if the Closing does not
occur because of a breach by a party hereto, such party will reimburse the other
party (as its sole and exclusive remedy hereunder) for its out-of-pocket costs
and expenses, including, without limitation, fees
<PAGE>
46
and expenses of counsel, financing and accountants and disbursements of
financial advisors, incurred in connection with the preparation, negotiation and
performance of this Agreement and the transactions contemplated hereby.
SECTION 10.02. Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given or
made (and shall be deemed to have been duly given or made upon receipt) by
delivery in person, by courier service, by cable, by telecopy, by telegram, by
telex or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 10.02):
(a) if to the Seller:
BE Aerospace, Inc.
1400 Corporate Center Way
Wellington, FL 33414
Attention: Thomas McCaffrey
Chief Financial Officer
Telecopier: (561) 791-3966
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: Alfred J. Ross, Esq.
Telecopier: (212) 848-7179
(b) if to the Purchaser:
Sextant Avionique, Inc.
1924 NW 84th Avenue
Miami, Florida 33126
Attention: Willy Moses
President
Telecopier: (305) 597-6366
<PAGE>
47
with a copy to:
Sextant Avionique, S.A.
Zone Aeronautique
Luis Breguet-BP 200
78141 Velizy-Villacoublay Cedex
France
Attention: Lucien Arbel
Telecopier: (011) 33-1-46-29-88-88
and
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attention: Alison M. Dreizen, Esq.
Telecopier: (212) 354-8113
SECTION 10.03. Public Announcements. Unless otherwise required
by applicable Law, no party to this Agreement shall make any public
announcements in respect of this Agreement or the transactions contemplated
hereby or otherwise communicate with any news media without prior notification
to the other parties, and the parties hereto shall cooperate as to the timing
and contents of any such announcement.
SECTION 10.04. Headings. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 10.05. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated hereby be consummated as
originally contemplated to the greatest extent possible.
SECTION 10.06. Entire Agreement. This Agreement (including the
Disclosure Schedule and the Exhibits hereto) constitutes the entire agreement of
the parties
<PAGE>
48
hereto with respect to the subject matter hereof and supersedes all prior
agreements and undertakings, both written and oral, between each the Seller and
the Purchaser with respect to the subject matter hereof and except as otherwise
expressly provided herein.
SECTION 10.07. Assignment. This Agreement shall not be
assigned by either party hereto, provided that the Purchaser may, by written
notice delivered to the Seller not less than three (3) days prior to the Closing
Date, designate a wholly owned subsidiary to assume all or a portion of the
obligations and rights of the Purchaser under this Agreement, provided, further,
however that no such assignment shall release the Purchaser from any of its
obligations under this Agreement or the Guarantor of its obligations under the
Guaranty.
SECTION 10.08. No Third-Party Beneficiaries. Except as
specifically provided in Article VIII, this Agreement is for the sole benefit of
the parties hereto and their permitted successors, assigns and nothing herein,
express or implied, is intended to or shall confer upon any other person or
entity any legal or equitable right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.
SECTION 10.09. Waivers and Amendments. This Agreement may be
amended or modified, and the terms and conditions hereof may be waived, only by
a written instrument signed by the parties hereto or, in the case of a waiver,
by each party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any right, power or
privilege hereunder, nor any single or partial exercise of any other right,
power or privilege hereunder, preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder. The rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies which any party may otherwise have at Law or in equity.
SECTION 10.10. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
required to be performed prior to the Closing was not performed in accordance
with the terms hereof and that, prior to the Closing, the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at Law or in equity.
SECTION 10.11. Governing Law; Dispute Resolution. (a) This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of New York applicable to contracts executed in and to be performed in
that State.
(b) In the event of any dispute in connection with or arising
out of the existence, validity, construction or performance of this Agreement
(or any terms hereof) (collectively, a "Dispute"), the parties hereto shall
attempt in good faith to negotiate and resolve any such
<PAGE>
49
Dispute. If after good faith negotiations the Dispute shall have not been
resolved, either party may deliver to the other party written notice of its
intention to submit the matter to arbitration (the "Arbitration Notice"). If the
matter is not resolved within ten (10) Business Days after the delivery of the
Arbitration Notice, or such later date as may be mutually agreed upon, then all
Disputes shall be finally settled by arbitration.
(c) The seat of the arbitration shall be in New York, and the
arbitration shall be conducted in English, in accordance with the Rules of
Conciliation and Arbitration of the International Chamber of Commerce by one or
more arbitrators appointed in accordance with such rules. The arbitrators are
precluded from considering or awarding consequential, special, punitive or
exemplary damages to any party in any arbitration conducted pursuant hereto. The
parties shall have the right to present documentary evidence and witnesses. The
parties shall also have the right to cross-examine witnesses. The decision of
the arbitrators shall be final and binding upon the parties, and no party shall
seek recourse to a law court or other authorities to appeal for revisions of
such decision. Nothing herein shall limit the ability of a party to seek
temporary or preliminary injunctive relief pending arbitration.
SECTION 10.12. Counterparts. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original and
all of which taken together shall constitute one and the same agreement.
<PAGE>
50
IN WITNESS WHEREOF, the Seller and the Purchaser each by its
respective officers thereunto duly authorized have caused this Agreement to be
executed as of the date first written.
BE AEROSPACE, INC.
By: /s/ Thomas P. McCaffrey
-----------------------------------
Name: Thomas P. McCaffrey
Title: Corporate Senior Vice
President and Chief
Financial Officer
SEXTANT AVIONIQUE, INC.
By: /s/ Willy Moses
-----------------------------------
Name: Willy Moses
Title: President/C.E.O.
<PAGE>
SEXTANT IN-FLIGHT SYSTEMS, LLC
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
February 25, 1999
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS ...................................................................2
1.1. Definitions ...................................................2
1.2. Other Definitions .............................................9
ARTICLE II
FORMATION .....................................................................9
2.1. Formation .....................................................9
2.2. Name ..........................................................9
2.3. Certificate of Formation ......................................9
2.4. Taxation ......................................................9
ARTICLE III
PURPOSES AND POWERS ...........................................................9
3.1. Purpose .......................................................9
3.2. Powers .......................................................10
3.3. Foreign Qualification ........................................10
ARTICLE IV
CAPITAL ......................................................................10
4.1. Capital Contributions and Membership Interest ................10
4.1.1. Additional Capital Contributions ...........................10
4.1.2. No Negative Capital Account Make Up ........................10
4.2. No Interest or Right to Withdraw .............................10
ARTICLE V
CREATION AND MAINTENANCE OF CAPITAL ACCOUNTS .................................10
5.1. Creation of Capital Account ..................................10
5.1.1. Cash Contributions/Distributions ...........................11
5.1.2. Property Contributions/Distributions .......................11
5.1.3. Profit .....................................................11
5.1.4. Loss .......................................................11
5.1.5. Capital Account Maintenance ................................11
ARTICLE VI
ALLOCATION OF PROFITS AND LOSSES .............................................12
6.1. Allocation of Profits and Losses .............................12
(1)
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6.1.1. Special Allocations ........................................12
6.1.2. Curative Allocations .......................................13
6.2. Tax Allocations ..............................................13
6.3. Income Characterization ......................................14
6.4. Change in Percentage Interests ...............................14
ARTICLE VII
DISTRIBUTIONS ................................................................14
7.1. Distribution of Cash .........................................15
7.2. Tax Distributions ............................................15
7.3. Distributions Made in Accordance with Priority Return and
Percentage Interests .........................................15
7.3.1. Approval of Distributions of Priority Return ...............15
7.4. Limitations on Distributions .................................16
7.4.1. Basis of Determination of Solvency for Distribution ........16
7.5. Distribution Restrictions ....................................16
7.6. Distribution in Termination of the Company ...................16
ARTICLE VIII
NEW MEMBERS ..................................................................16
8.1. Approval of New Members ......................................16
8.1.1. New Membership Interests ...................................17
8.2. Admission of Members .........................................17
8.3. Statements of Membership Interests ...........................17
ARTICLE IX
MEMBER MEETINGS AND MANAGEMENT ...............................................17
9.1. Meetings of Members ..........................................17
9.1.1. Annual Meetings ............................................17
9.1.2. Special Meetings ...........................................17
9.1.3. Notice of Membership Meetings ..............................17
9.1.4. Waiver of Notice of Meeting of Members .....................18
9.1.5. Location of Member Meetings ................................18
9.1.6. Quorum of Members ..........................................18
9.1.7. Adjournment of Meetings of Members .........................18
9.2. Action Without a Meeting of the Members ......................18
9.2.1. Effective Date of Member Action by Consent .................19
9.3. Activities Requiring Member Approval .........................19
ARTICLE X
BOARD OF GOVERNORS ...........................................................19
10.1. Management of the Company ...................................20
(2)
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10.1.1. Governor is Not an Agent ..................................20
10.2. Election of Board ...........................................20
10.3. Term of Office of Governor ..................................20
10.4. Compensation of Governors ...................................20
10.5. Expulsion of a Governor .....................................20
10.6. Actions by the Board ........................................20
10.6.1. Major Decisions ...........................................20
10.7. Committees of the Board .....................................21
10.7.1. General ...................................................21
10.7.2. Pricing Committee .........................................21
10.8. Meetings of the Board .......................................21
10.8.1. Regular Meetings of the Board .............................21
10.8.2. Special Meetings of the Board .............................21
10.8.3. Notices for Board Meetings ................................21
10.8.4. Waiver of Notice of Board Meeting .........................21
10.8.5. Telephonic Board Meeting ..................................22
10.8.6. Quorum of Governors .......................................22
10.8.7. Action by Proxy ...........................................22
10.8.8. Board Action Without a Meeting ............................22
10.8.9. Effective Date of Board Action by Consent .................22
ARTICLE XI
DEADLOCKS ....................................................................22
11.1. Definition of Deadlock ......................................23
11.2. Referral to Chief Executive Officers ........................23
11.3. Auction .....................................................23
ARTICLE XII
MANAGERS; AUDITOR ............................................................24
12.1. Managers ....................................................24
12.1.1. Nomination ................................................25
12.1.2. Election and Term .........................................25
12.1.3. Powers ....................................................25
12.2. Duties of the Chief Manager .................................25
12.3. Duties of the Chief Financial Officer .......................26
12.4. Additional Managers .........................................27
12.5. Compensation of Managers ....................................27
12.6. Exclusivity of Service ......................................27
12.7. Standard of Conduct of Managers .............................27
12.8. Auditor .....................................................27
ARTICLE XIII
(3)
<PAGE>
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AFFILIATED TRANSACTIONS ......................................................27
13.1. Dealing With Affiliated Persons .............................27
13.1.1. Written Agreement .........................................27
13.1.2. Intentionally Omitted .....................................27
13.1.3. Loans to the Company from Members or Affiliated Persons ...27
13.2. Policy ......................................................28
13.3. Reports .....................................................28
ARTICLE XIV
INDEMNIFICATION ..............................................................28
14.1. Indemnification .............................................28
14.2. Insurance ...................................................28
14.3. Non-Exclusive Right .........................................29
ARTICLE XV
FISCAL MATTERS ...............................................................29
15.1. Fiscal Year .................................................29
15.2. Books and Records ...........................................29
15.3. Reports to Members ..........................................29
15.3.1. Tax Information ...........................................29
15.3.2. Annual Reports ............................................30
15.3.3. Reports to the Board ......................................30
15.4. Tax Matters Representative ..................................30
ARTICLE XVI
DISSOLUTION EVENTS ...........................................................31
16.1. Dissolution .................................................31
16.1.1. Dissolution Avoidance Consent .............................31
16.1.2. Events Causing Dissolution ................................31
16.2. Withdrawal ..................................................32
16.3. General Effect of a Dissolution Event .......................32
16.4. Advance Notice of Voluntary Dissolution .....................33
ARTICLE XVII
ASSIGNMENTS ..................................................................33
17.1. Restriction on Assignment ...................................33
17.2. Definition of Assignment ....................................34
17.3. Permitted Assignments of Membership Interest ................34
17.3.1. Partial Assignment ........................................34
17.3.2. Assignment to a Non-Member ................................34
17.4. Other Approvals .............................................34
(4)
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Page
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17.5. Assignee to Assume Company Obligations ......................34
17.6. Call Right and Right of First Offer .........................35
ARTICLE XVIII
TERM, TERMINATION, WINDING UP ................................................36
18.1. Term ........................................................37
18.2. Events Causing Dissolution and Winding Up ...................37
18.3. Winding Up Affairs on Dissolution ...........................37
18.4. Distribution Upon Dissolution ...............................37
ARTICLE XIX
GENERAL PROVISIONS ...........................................................37
19.1. Notices .....................................................38
19.1.1. Company Notices ...........................................38
19.1.2. Member Notices ............................................38
19.2. Waiver of Right to Partition and Decree of Dissolution ......38
19.3. Non-Competition Covenant ....................................38
19.4. Integration .................................................39
19.5. Applicable Law ..............................................39
19.6. Severability ................................................40
19.7. Binding Effect ..............................................40
19.8. Amendment ...................................................40
19.9. Method of Accounting ........................................40
19.10. Section Captions ...........................................40
19.11. Confidentiality ............................................40
19.11.1. Disclosure and Use Restrictions ..........................40
19.11.2. Safeguarding .............................................41
19.11.3. Termination ..............................................41
19.12. Arbitration ................................................41
19.13. Counterpart Execution ......................................42
(5)
<PAGE>
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
SEXTANT IN-FLIGHT SYSTEMS, LLC
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY
AGREEMENT is made and entered into as of the 25th day of February 1999, and is
by and among BE Aerospace, Inc. a Delaware corporation ("BE Aerospace"), Sextant
Avionique, Inc., a Florida corporation ("Sextant"), BE Intellectual Property,
Inc., a Delaware corporation ("BE Intellectual Property"), Puritan-Bennett Aero
Systems Co., a Delaware corporation ("Puritan") and the other persons being
Members from time to time.
W I T N E S S E T H:
WHEREAS, Sextant In-Flight Systems, LLC (formerly known as
In-Flight Entertainment, LLC) (the "Company") was formed as a limited liability
company under and pursuant to the Delaware Limited Liability Company Act (the
"Act") to conduct certain business as a limited liability company;
WHEREAS, the Company has been operated pursuant to the Limited
Liability Company Agreement dated as of November 5, 1997, as amended pursuant to
Amendment No. 1 thereto dated as of November 19, 1997 (as so amended, the
"Original LLC Agreement");
WHEREAS, the Original LLC Agreement was amended and restated
pursuant to an Amended and Restated Limited Liability Company Agreement dated as
of January 12, 1999 (the "First Amended and Restated LLC Agreement") in order to
reorganize the Company into a board-managed limited liability company;
WHEREAS, BE Aerospace, Sextant, BE Intellectual Property and
Puritan desire to amend and restate the First Amended and Restated LLC Agreement
in order to admit Sextant as a Member of the Company and to set forth in full
all of the terms and conditions pursuant to which the Company shall be managed
and thereby establish the various rights and obligations of the persons being
Members from time to time, in this amended and restated operating agreement
(this
<PAGE>
"Agreement").
NOW, THEREFORE, in consideration of the foregoing, and of
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto from time to time, intending to be
legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. Any terms with their initial letters
capitalized and not otherwise defined in this Agreement shall have the meaning
set forth in the Act. The singular shall include the plural and the masculine
gender shall included the feminine and neuter, and vice versa, as the context
requires. As used in this Agreement, the following terms shall have the
following meaning:
"Action" means any claim, action, suit, arbitration or
proceeding by or before any Governmental Authority or arbitrator.
"Affiliated Person" means, when used with respect to a
specified Person, another Person that, either directly or indirectly
through one or more intermediaries, controls or is controlled by or is
under common control with the Person specified.
"Bankruptcy" means: (a) the making of a general assignment for
the benefit of creditors; (b) the filing of a voluntary bankruptcy
petition; (c) becoming the subject of an order for relief or a
declaration of insolvency in any federal or state bankruptcy or
insolvency proceeding which is not dismissed within ninety (90) days;
(d) the filing of a petition or answer seeking a reorganization,
arrangement, composition, readjustment, liquidation, dissolution or
similar relief under any law; (e) the seeking, consenting to, or
acquiescence in the appointment of a trustee, receiver or liquidator of
the Member or of all, or substantially all, of the Member's properties;
(f) a proceeding seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief under any law
has been commenced and ninety (90) days having expired without
dismissal thereof; or (g) the involuntary appointment of a trustee,
receiver or liquidator of the properties or of the person or with
respect to all, or substantially all, of the Member's properties and
ninety (90) days having expired without the appointment having been
vacated or stayed.
"BE Condition" means (i) BE Aerospace, BE Intellectual
Property and Puritan or any Permitted Assignee owns in the aggregate at
least forty-five percent (45%) of the aggregate Membership Interests or
(ii) the obligations of the parties pursuant to Section 2.04 of the
Purchase Agreement have not been finally determined and paid in full.
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<PAGE>
"BE/Harris LiveTV, LLC" means BE/Harris LiveTV, LLC, a
Delaware limited liability company jointly owned by the Company and
Harris Corporation.
"Board" means the Board of Governors of the Company as
provided for in this Agreement.
"Business Day" means a day that is not a Saturday, a Sunday or
other day on which banks are required or authorized by law to be closed
in New York City or Paris, France.
"Capital Account" means the account maintained pursuant to
Article V.
"Cash" means all cash funds of the Company on hand at the end
of each calendar quarter after (a) payment of all Company obligations
including debt service, rent, salaries, contractual obligations and all
other cash expenses, expenditures and contingencies for the period, (b)
the funding of such reserves for working capital, operating expenses
and capital expenditures as the Board may determine is prudent, and (c)
any unpaid current cash obligations of the Company at the end of such
period (including those which are in dispute).
"Certificate of Formation" means the certificate of formation
of the Company dated as of November 5, 1997 filed with the Secretary of
State of the State of Delaware.
"Chief Manager" means the initial Chief Manager of the Company
as described in Article XII below or any subsequent person appointed as
Chief Manager by the Board. The Chief Manager may utilize the title of
"President," "Chief Executive Officer" or other title as the Board may
approve.
"Class" means the class of the Class One Membership Interest
and/or Class Two Membership Interest as appropriate.
"Class One Member" means a Member holding a Class One
Membership Interest.
"Class One Membership Interest" means the Membership Interests
of such Class received by one or more Members of the Company as
designated on Schedule A hereto. The Class One Membership Interest
shall include the right to elect three (3) Governors to the Board in
accordance with Section 10.2.
"Class Two Member" means a Member holding a Class Two
Membership Interest.
"Class Two Membership Interest" means the Membership Interests
of such Class received by one or more Members of the Company as
designated on Schedule A hereto. If the BE Condition is met, the Class
Two Membership Interest shall include the right to elect two (2)
Governors to the Board in accordance with Section 10.2.
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<PAGE>
"Code" means the Internal Revenue Code of 1986, as amended
from time to time. All references herein to sections of the Code shall
include any corresponding provision or provisions of succeeding law
where effective.
"Company" means Sextant In-Flight Systems, LLC.
"control" (including the terms "controlled by" or "under
common control with"), with respect to the relationship between or
among two or more Persons, means the possession, directly or indirectly
or as trustee or executor, of the power to direct or cause the
direction of the affairs or management of a Person, whether through the
ownership of voting securities, as trustee or executor, by contract or
otherwise, including, without limitation, the ownership, directly or
indirectly, of securities having the power to elect a majority of the
board of directors or similar body governing the affairs of such
Person.
"Depreciation" means, for any fiscal year, an amount equal to
the depreciation, amortization, or other cost recovery deduction
allowable for federal income tax purposes with respect to an asset of
the Company for such fiscal year, except that if the Gross Asset Value
of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such fiscal year, Depreciation shall be an
amount which bears the same ratio to such beginning Gross Asset Value
as the federal income tax depreciation, amortization or other cost
recovery deduction for such Fiscal Year bears to such beginning
adjusted tax basis; provided that, if the adjusted basis for federal
income tax purposes of an asset at the beginning of such Fiscal Year is
zero, Depreciation shall be determined with reference to such beginning
Gross Asset Value using any reasonable method selected by the Tax
Matters Representative.
"EBITDA" means earnings before interest, taxes, depreciation
and amortization.
"Governmental Authority" means any government, any
governmental entity, department, commission, board, agency or
instrumentality, and any court, tribunal, or judicial or arbitral body,
whether federal, state or local.
"Governor" means any natural person serving on the Board.
"Gross Asset Value" means, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as
follows:
(a) The initial Gross Asset Value of any asset (other
than money) contributed by a Member to the Company shall be
the gross fair market value of such asset as agreed to by, if
the BE Condition is met, a Super-Majority Vote of the Board
and, if the BE Condition is not met, a Majority Vote;
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<PAGE>
(b) The Gross Asset Values of all Company assets
shall be adjusted to equal their respective gross fair market
values as determined by, if the BE Condition is met, a
Super-Majority Vote of the Board and, if the BE Condition is
not met, a Majority Vote as of the following times: (i) the
acquisition of an additional interest in the Company by any
new or existing Member in exchange for more than a de minimis
Capital Contribution; (ii) the distribution by the Company to
a Member of more than a de minimis amount of property as
consideration for an interest in the Company; or (iii) the
liquidation of the Company within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Regulations, provided, that
adjustments pursuant to clauses (i) and (ii) above shall be
made only if the Board, by, if the BE Condition is met, a
Super-Majority Vote, and, if the BE Condition is not met, a
Majority Vote determines that such adjustments are necessary
or appropriate to reflect the relative economic interests of
the Members in the Company; and
(c) The Gross Asset Value of any Company asset
distributed to any Member shall be the gross fair market value
of such asset on the date of distribution, as determined by,
if the BE Condition is met, a Super-Majority Vote of the Board
and, if the BE Condition is not met, a Majority Vote.
If the Gross Asset Value of an asset has been determined or
adjusted pursuant to subparagraph (a) or (b), such Gross Asset Value
shall thereafter be adjusted by the Depreciation taken into account
with respect to such asset.
"Indebtedness" means, without duplication, (a) all
indebtedness (including principal, interest, fees, penalties and
charges) of the Company for borrowed money or for the deferred purchase
price of property or services evidenced by notes or other written
obligations, (b) the face amount of all letters of credit issued for
the account of the Company and all drafts drawn thereunder, (c) all
liabilities secured by any lien on any property owned by the Company,
whether or not such liabilities have been assumed by the Company, (d)
the aggregate amount required to be capitalized under leases with
respect to which the Company is the lessee, (e) indebtedness of other
Persons assumed or guaranteed by the Company and (f) renewals,
extensions and refundings of such Indebtedness.
"In-Flight Entertainment Business" means any product,
including systems, equipment and software related thereto, for
entertainment, passenger information, passenger communication and
monitoring purposes used solely by passengers and cabin crew onboard
commercial passenger transport aircraft.
"In-Flight Entertainment Systems" means any product, including
systems, equipment, software, services, and support services related
thereto, for entertainment, passenger information, passenger
communication and monitoring purposes used solely by passengers
- -5-
<PAGE>
and cabin crew onboard aircraft.
"Intellectual Property" means any patents, trademarks,
copyrights, computer software programs or proprietary information of
any type.
"Managers" means the Chief Manager and the Chief Financial
Officer, and any other managers who may be appointed from time to time
by the Board to manage the day to day affairs of the Company pursuant
to the provisions of this Agreement and the direction of the Board.
Managers may be given such titles as the Board may determine is
appropriate.
"Majority in Interest" means (a) those remaining Members that
would be entitled to receive a majority of the distributions that would
be made if the business of the Company is not continued, and (b) those
remaining Members that would receive a majority of any distributions in
excess of the distributions described in clause (a) if the business of
the Company is continued as reasonably determined in good faith by a
majority of the Board. This definition shall be interpreted in a manner
consistent with the safe-harbor provision of Revenue Procedure 94-46,
as it may be amended, modified, superseded or supplemented from time to
time.
"Majority Vote" means (a) with respect to the Members, a vote
by Members having a majority of the Membership Interests eligible to
vote on the matter, or (b) with respect to the Board, a majority in
number of the Governors.
"Members" means those persons set forth and identified as
Members in Schedule A attached hereto, and as such Schedule may be
hereafter amended. Schedule A shall be amended as appropriate upon the
admission of new Members pursuant to the terms of this Agreement
without further action by the Members.
"Membership Interest" means each Member's interest in the
Company. The Classes of Membership Interests are shown on Schedule A
attached hereto.
"Net Profit" and "Net Loss" mean, for each fiscal year, an
amount equal to the Company's taxable income or loss for such fiscal
year, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss or deduction required to be
stated separately pursuant to Code Section 703(a)(1) shall be included
in taxable income or loss), with the following adjustments:
(a) Any income of the Company that is exempt from
federal income tax and not otherwise taken into account in
computing Net Profit or Net Loss pursuant to this definition
of "Net Profit" and "Net Loss" shall be added to such taxable
income or loss;
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<PAGE>
(b) Any expenditures of the Company described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Section 1.704-1(b)(2)(iv)(i) of the
Regulations, and not otherwise taken into account in computing
Net Profit or Net Loss pursuant to this definition of "Net
Profit" and "Net Loss", shall be subtracted from such taxable
income or loss;
(c) In the event the Gross Asset Value of any Company
asset is adjusted pursuant to subparagraph (b) or (c) of the
definition of Gross Asset Value, the amount of such adjustment
shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Net Profit
or Net Loss;
(d) Gain or loss resulting from any disposition of
Company property with respect to which gain or loss is
recognized for federal income tax purposes shall be computed
by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such
property differs from its Gross Asset Value;
(e) In lieu of depreciation, amortization or any
other cost recovery deductions taken into account in computing
taxable income or loss, there shall be taken into account
Depreciation for purposes of computing Net Profit or Net Loss;
and
(f) Any items which are specially allocated pursuant
to Sections 6.1.1 and 6.1.2 shall not be taken into account in
computing Net Profit or Net Loss.
The amounts of the items of Company income, gain, loss or deduction
available to be specially allocated pursuant to Sections 6.1.1 and
6.1.2 shall be determined in a manner consistent with the rules set
forth in subparagraphs (a) through (e) above.
"1933 Act" means the U.S. Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"Percentage Interest" of a Member means the percentage of the
aggregate Membership Interests held by such Member. The initial
Percentage Interest of each Member shall be as set forth on Schedule A.
"Permitted Assignees" shall mean any Person that (a) has
credit standing sufficient to meet its obligations as a Member, (b)
does not own or operate any significant amount of assets or businesses
which are used in the production of In-Flight Entertainment Systems,
(c) is not (i) a Person listed on Schedule 1.1(a) attached hereto, or
(ii) any other similarly situated Person that has material conflicts of
interest with the Company or the Non-Selling Member, including, but not
limited to, being a competitor of the Company or the Non-Selling
- -7-
<PAGE>
Member, (d) is not a Person with whom the Non-Selling Member has a
material conflict with respect to any Action, (e) is acting on its own
behalf and not on behalf of any other Person and (f) has a good general
business reputation in the industries in which it is a participant.
"Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity.
"Priority Return" shall have the meaning set forth in Schedule
1.1(b).
"Public Offering" means an underwritten public offering of
equity securities of the Company pursuant to an effective registration
statement under the 1933 Act.
"Purchase Agreement" means the Purchase Agreement dated as of
January 25, 1999 between BE Aerospace and Sextant as it may be amended,
supplemented or otherwise modified in accordance with its terms.
"Quorum" means, with respect to Members, those Members holding
a seventy-five percent (75%) majority of the Membership Interests
entitled to vote and, with respect to the Board, eighty percent (80%)
of the Governors.
"Regulations" shall mean, except as expressly provided to the
contrary herein, the regulations promulgated by the United States
Department of the Treasury pursuant to and in respect of provisions of
the Code. Unless otherwise provided and subject to applicable
transition rules, if any, all references herein to sections of the
Regulations shall include any corresponding provisions of succeeding,
substitute, proposed or final Regulations whose effective dates are
applicable to the Company.
"Subsidiary" shall mean, with respect to any Person, any
corporation, partnership or other entity of which at least a majority
of the securities or other ownership interests having by the terms
thereof ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions of such
corporation, partnership or other entity (irrespective of whether or
not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall
have or might have voting power by reason of the happening of any
contingency) is at the time directly or indirectly owned or controlled
by such Person or one or more Subsidiaries of such Person or by such
Person and one or more Subsidiaries of such Person.
"Super-Majority Vote" means, with respect to the Members, more
than seventy-five percent (75%) of the Membership Interests eligible to
vote on a specific issue, matter or action. With respect to the
Governors, "Super-Majority Vote" means more than eighty percent (80%)
of the number of Governors eligible to vote on a specific issue, matter
or action.
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<PAGE>
"Third Party" means, with respect to any Member, any other
Person, other than the Company and its subsidiaries or any Affiliated
Person of such Member.
1.2. Other Definitions. Other terms may be defined in the body
of this Agreement.
ARTICLE II
FORMATION
2.1. Formation. The Members hereby acknowledge the formation
of the Company under and pursuant to the Act on November 5, 1997.
2.2. Name. The name of the Company shall be Sextant In-Flight
Systems, LLC. The Company may, by a Super-Majority Vote of the Members, change
its name and, if Sextant no longer owns more than 50% of the outstanding
Membership Interests, the name of the Company shall be changed to eliminate the
name "Sextant". The Company may adopt and conduct its business under such
assumed or trade names as the Board may from time to time determine. The Company
shall file assumed or fictitious name certificates as may be required to conduct
business in any jurisdiction.
2.3. Certificate of Formation. The Certificate of Formation as
filed with the Secretary of State of the State of Delaware on November 5, 1997
by Edmund J. Moriarty, as an authorized person, is hereby adopted and ratified
by the Members and is attached hereto as Schedule B. In the event of a conflict
between the terms of this Agreement and the terms of the Certificate of
Formation, the terms of the Certificate of Formation shall prevail.
2.4. Taxation. It is the intention of the Members that the
Company be treated as a partnership for federal and state income tax purposes.
All the terms and provisions of this Agreement shall be interpreted in
accordance with this intention. The Members shall not take any tax position or
other action that is inconsistent with such intention.
ARTICLE III
PURPOSES AND POWERS
3.1. Purpose. The purposes of the Company shall be to own,
purchase, operate, finance, provide for management of, and possibly sell or
otherwise dispose of assets connected with the business of manufacturing,
marketing and distributing In-Flight Entertainment Systems, including, without
limitation, the Company's interest in BE/Harris LiveTV, LLC and activities
related or ancillary thereto (the "Business") and activities permitted by the
Act and approved by the Board.
- -9-
<PAGE>
3.2. Powers. The Company shall have the full power and
authority to conduct its business as provided by the Act and applicable law.
3.3. Foreign Qualification. Prior to the Company conducting
business in any jurisdiction other than Delaware, the Company shall comply, to
the extent procedures are available and with respect to those matters reasonably
within the control of the Chief Manager, with all requirements necessary to
qualify the Company as a foreign limited liability company in that jurisdiction.
Each Member shall execute, acknowledge, swear to, and deliver all certificates
and other instruments conforming with this Agreement that are necessary or
appropriate to qualify, continue or, if deemed appropriate by the Board,
terminate the Company as a foreign limited liability company in all such
jurisdictions in which the Company may conduct business.
ARTICLE IV
CAPITAL
4.1. Capital Contributions and Membership Interest. Except as
adjusted or revised pursuant to the terms of this Agreement, each Member's
Membership Interest shall equal the Percentage Interest for each such Member and
for the Class or Classes set forth on Schedule A.
4.1.1. Additional Capital Contributions. There shall be no
further assessments without, if the BE Condition is met, a Super-Majority Vote
of the Members and, if the BE Condition is not met, a Majority Vote. The failure
to honor a properly required assessment shall result in the dilution of the
failing Member's Membership Interest as provided in the assessment.
4.1.2. No Negative Capital Account Make Up. The Members shall
have no obligation to restore any deficit in their respective Capital Accounts.
4.2. No Interest or Right to Withdraw. No Member shall have
the right to demand the return of, or otherwise withdraw, his contribution, or
to receive any specific property of the Company, except as specifically provided
in this Agreement. No Member shall have the right to demand and receive property
other than cash in return for his contributions. Except as specifically provided
herein, no Member shall have priority over any other Member, either as to the
return of capital or as to income, losses or distributions. No interest shall be
paid on capital contributions or on balances in capital accounts.
ARTICLE V
CREATION AND MAINTENANCE OF CAPITAL ACCOUNTS
5.1. Creation of Capital Account. A Capital Account shall be
maintained for each
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<PAGE>
Member for the full term of this Agreement in accordance with the capital
accounting rules of Section 1.704-1(b)(2)(iv) of the Regulations. Each Member
shall have only one Capital Account, regardless of (a) the number or Classes of
interests in the Company owned by such Member, (b) the time or manner in which
such interests were acquired by such Member, and (c) whether some or all of such
Member's Membership Interest have been transferred to another Person (in such
case, however, such new Member shall be allocated his proportionate portion of
such Capital Account balance which shall thereafter be maintained with respect
to such Member). Pursuant to the basic rules of Section 1.704-1(b)(2)(iv) of the
Regulations, the Capital Account for each Member shall be maintained in
accordance with the following provisions:
5.1.1. Cash Contributions/Distributions. Each Member's Capital
Account shall be increased by the amount of money contributed by such Member (or
such Member's predecessor in interest) to the capital of the Company and
decreased by the amount of money distributed to such Member (or such Member's
predecessor in interest);
5.1.2. Property Contributions/Distributions. Each Member's
Capital Account shall be increased by the initial Gross Asset Value of each
property (determined without regard to ss.7701(g) of the Code) contributed by
such Member (or such Member's predecessor in interest) to the capital of the
Company, (net of all liabilities that the Company is considered to assume or
take subject to at the time of such contribution (as determined under ss.752 of
the Code)) and decreased by the Gross Asset Value of each property (determined
without regard to ss.7701(g) of the Code) distributed to such Member (or such
Member's predecessor in interest), (net of all liabilities that such Member is
considered to assume or to which such property is subject at the time of such
distribution (as determined under ss.752 of the Code));
5.1.3. Profit. Each Member's Capital Account shall be
increased by the amount of such Member's distributable share of Net Profit and
each item of Company profit, income and gain specially allocated to such Member
(or such Member's predecessor in interest) pursuant to Section 6.1;
5.1.4. Loss. Each Member's Capital Account shall be decreased
by the amount of such Member's distributive share of Net Loss and each item of
Company loss and deduction and expenditures that are specially allocated to such
Member (or such Member's predecessor in interest) pursuant to Section 6.1.
5.1.5. Capital Account Maintenance. These provisions relating
to the maintenance of Capital Accounts are intended to comply with ss.1.704-1(b)
of the Regulations and shall be interpreted and applied in a manner consistent
with such Regulations. The Capital Account balances of the Members as of the
date of this Agreement shall be as set forth on Schedule A hereto. In the event
the Tax Matters Representative, based on the advice of counsel or certified
public accountant, determines that it is prudent to modify the manner in which
the Capital Accounts, or any increases
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<PAGE>
or decreases thereto, are computed in order to comply with such Regulations, the
Tax Matters Representative may make such modification, provided that such
modification shall impact cash distributions to the minimum extent possible.
ARTICLE VI
ALLOCATION OF PROFITS AND LOSSES
6.1. Allocation of Profits and Losses. Subject to the special
allocation rules set forth in Sections 6.1.1 and 6.1.2, the Net Profits and Net
Losses of the Company for each fiscal year shall be allocated among the Members
as follows: (i) first, Net Profits and Net Losses shall be tentatively allocated
among the Members in proportion to their Percentage Interests in the Company and
(ii) second, Net Profits (or, if necessary, items of gross income or gain)
tentatively allocated to Sextant for a fiscal year shall be reallocated to BE
Aerospace until BE Aerospace shall have received cumulative allocations pursuant
to this clause (ii) for such fiscal year and all prior fiscal years in an amount
equal to the Priority Return of BE Aerospace for such fiscal year and all prior
fiscal years. Any credit available for income tax purposes shall be allocated
among the Members in proportion to their Percentage Interests.
6.1.1. Special Allocations. To the extent consistent with
ss.1.704-1(b)(2)(iv) of the Regulations, the following special allocations are
made in the following order:
(a) Minimum Gain Chargeback. Except as otherwise provided in
Section 1.704-2(f) of the Regulations, if there is a net decrease in
Company minimum gain during the year, each Member shall be specially
allocated items of Company income and gain for the year (and, if
applicable, subsequent years) equal to such Member's share of the net
decrease in Company minimum gain, determined in accordance with Section
1.704-1(g) of the Regulations. This allocation shall be defined,
interpreted and determined in accordance with applicable Regulations.
(b) Member Minimum Gain Chargeback. Except as otherwise
provided in Section 1.704-2(i)(4) of the Regulations, if there is a
net decrease in Member minimum gain attributable to a Member
nonrecourse debt during the year, each Member with a share of the
Member minimum gain shall be specially allocated items of Company
income and gain for the year (and, if necessary, subsequent fiscal
years) equal to such Member's share of the decrease in Member minimum
gain attributable to such Member, determined in accordance with Section
1.704-2(i)(4) of the Regulations. This allocation shall be defined,
interpreted, and determined in accordance with applicable Regulations.
(c) Qualified Income Offset. If a Member unexpectedly receives
any adjustments, allocations, or distributions described in Regulation
ss.1.704- 1(b)(2)(ii)(d)(4)-(6),
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items of Company income and gain shall be specially allocated to each
Member in an amount and manner sufficient to eliminate, to the extent
required by Regulations, the negative Capital Account balance of such
Member as quickly as possible. This allocation shall be made only if a
Member would have a negative Capital Account balance after all other
allocations in this Section 6.1 are made.
(d) Gross Income Allocation. In the event any Member has a
negative Capital Account balance at the end of any fiscal year which is
in excess of the sum of (i) the amount such Member is obligated to
restore pursuant to any provision of this Agreement and (ii) the amount
such Member is deemed to be obligated to restore pursuant to the
penultimate sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of
the Regulations, each such Member shall be specially allocated items of
Company income and gain in the amount of such excess as quickly as
possible. This allocation shall be made only if a Member would have a
negative Capital Account balance after all other allocations in this
Section 6.1 are made.
(e) Nonrecourse Deductions. Nonrecourse deductions for any
fiscal year shall be allocated to the Members pro rata in accordance
with their respective Percentage Interests in the Company.
(f) Member Nonrecourse Deductions. Member nonrecourse
deductions for any fiscal year shall be specially allocated to the
Member who bears the economic risk of loss, or to the Members in the
proportions in which they bear the economic risk of loss, with respect
to the Member nonrecourse debt to which such Member nonrecourse
deductions are attributable in accordance with Section 1.704-2(i)(1) of
the Regulations.
6.1.2. Curative Allocations. The allocations set forth in
Section 6.1.1 (the "Regulatory Allocations") are intended to comply with certain
requirements of the Regulations. It is the intent of the Members that, to the
extent possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other items of Company
income, gain, loss or deduction pursuant to this Section 6.1.2. Therefore,
notwithstanding any other provision of this Section 6.1 (other than the
Regulatory Allocations), the Board shall make such offsetting special
allocations of Company income, gain, loss or deduction in whatever manner it
determines appropriate so that, after such offsetting allocations are made, each
Member's Capital Account balance is, to the extent possible, equal to the
Capital Account balance such Member would have had if the Regulatory Allocations
were not part of this Agreement and all Company items were allocated pursuant to
this Section 6.1 without regard to the Regulatory Allocations. In exercising its
discretion under this Section 6.1.2, the Board shall take into account future
Regulatory Allocations under Section 6.1.1 that, although not yet made, are
likely to offset other Regulatory Allocations previously made under Section
6.1.1.
6.2. Tax Allocations. In accordance with Code Section 704(c)
and the Regulations
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thereunder, income, gain, loss and deduction with respect to any property
contributed to the capital of the Company shall, solely for tax purposes, be
allocated among the Members so as to take account of any variation between the
adjusted basis of such property to the Company for federal income tax purposes
and its initial Gross Asset Value (computed in accordance with the definition of
Gross Asset Value). In the event the Gross Asset Value of any Company asset is
adjusted pursuant to subparagraph (b) of the definition of Gross Asset Value,
subsequent allocations of income, gain, loss and deduction with respect to such
asset shall take account of any variation between the adjusted basis of such
asset for federal income tax purposes and its Gross Asset Value in the same
manner as under Code Section 704(c) and the Regulations thereunder. Any
elections or other decisions relating to the allocations described in this
Section 6.2 shall be made by the Tax Matters Representative in any manner that
reasonably reflects the purpose and intention of this Agreement. Allocations
pursuant to this Section 6.2 are solely for purposes of federal, state and local
taxes and shall not affect, or in any way be taken into account in computing,
any Member's Capital Account or share of Net Profit, Net Loss, other items or
distributions pursuant to any provision of this Agreement. Except as otherwise
provided in this Agreement, for federal, state and local tax purposes, all items
of Company income, gain, loss, deduction and any other allocations not otherwise
provided for shall be divided among the Members in the same proportions as they
share Net Profit or Net Loss, or amounts specially allocated pursuant to Section
6.1.1 or 6.1.2, as the case may be, for the fiscal year.
6.3. Income Characterization. For purposes of determining the
character (as ordinary income or capital gain) of any taxable income of the
Company allocated to the Members pursuant to this Article VI, such portion of
the taxable income of the Company which is treated as ordinary income
attributable to the recapture of depreciation shall, to the extent possible, be
allocated among the Members in the proportion which (a) the amount of
depreciation previously allocated to each Member or such Person's predecessors
in interest bears to (b) the total of such depreciation allocated to all
Members. This Section 6.3 shall not alter the amount of allocations between the
Members pursuant to Section 6.1, but merely the character of income so
allocated.
6.4. Change in Percentage Interests. Notwithstanding anything
to the contrary herein, in the event any Member's Membership Interest changes
during a fiscal year for any reason, including, without limitation, the transfer
of any Membership Interest in the Company, allocations of taxable Net Profit and
Net Loss, and special allocation pursuant to Sections 6.1.1 and 6.1.2, shall be
adjusted as necessary to reflect the varying interests of the parties during
such year. Ordinarily this will be based on the proportion of the year such
Person held such Membership Interest, but in the event of any significant
transactions or uneven income or loss, the Board may direct that a closing of
the books method be used.
ARTICLE VII
DISTRIBUTIONS
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7.1. Distribution of Cash. Except as provided in Sections 7.2
and 7.6, all distributions of Cash, whether in cash or other property, whether
arising from operations or the termination of the Company, shall be made to the
Members in proportion to the respective Percentage Interests, on the record date
of such distribution. All amounts withheld pursuant to federal, state, or local
tax laws and remitted to such taxing authority(s) with respect to any payment or
distribution to a Member shall be treated as distributed to the Member.
7.2. Tax Distributions. To the maximum extent possible, on or
before the tenth day of April, July, October and January of each year with the
intent to meet estimated tax payment obligations, the Board shall make
distributions of Cash or borrowed funds to the Members in an amount equal to
forty percent (40%) of the estimated "Adjusted Allocated Taxable Income" of all
Members for all preceding calendar quarter(s) within such calendar year (the
"Tax Distribution") less an amount equal to the Tax Distributions previously
made for such year. Any such distributions to Members shall be made in
proportion to the "Adjusted Allocated Taxable Income" of each Member. The
"Adjusted Allocated Taxable Income" of a Member shall be the estimated taxable
income of the Company, if any, which is allocated to such Member for the
applicable period. For this purpose, the special allocation of any income, gain,
loss, depreciation and other deduction to a Member pursuant to Section 704(c) of
the Code shall not be taken into account. Any overpayment of distributions made
under this Section 7.2 shall be carried over to subsequent years and treated as
a current distribution until it is used.
7.3. Distributions Made in Accordance with Priority Return and
Percentage Interests. Subject to Section 7.4, all distributions, other than
those required to fund the mandatory Tax Distribution to each Member, shall be
made (i) first to BE Aerospace until BE Aerospace shall have received cumulative
distributions pursuant to this clause (i) equal to the excess of (A) the
cumulative Net Profits (and items of gross income and gain) allocated to BE
Aerospace pursuant to clause (ii) of Section 6.1 for the current fiscal year and
all prior fiscal years over (B) the cumulative amount of Tax Distributions made
to BE Aerospace for the current fiscal year and all prior fiscal years with
respect to allocations of Priority Returns pursuant to clause (ii) of Section
6.1, and (ii) thereafter in accordance with the Percentage Interests of the
Members; provided, that, for purposes of distributions made pursuant to clause
(ii) of this Section 7.3, if a Tax Distribution (other than a Tax Distribution
attributable to the Priority Returns) has resulted in distributions of Cash
otherwise than in accordance with each Member's Percentage Interest, then
adjustments in the distribution of remaining Cash at the end of subsequent
taxable years shall be made in order that the Cash distributions received by
each Member with respect to each taxable year pursuant to clause (ii) of this
Section 7.3 shall be, as closely as possible, in proportion to such Member's
Percentage Interest with respect to such fiscal year.
7.3.1. Approval of Distributions of Priority Return. Sextant
agrees to cause any Governors elected by Sextant not to unreasonably withhold
approval of distributions of the Priority Return to BE Aerospace.
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7.3.2. BE Aerospace Letter. On the date hereof, BE Aerospace
and Sextant shall execute and deliver the BE Aerospace letter, a form of which
is attached hereto as Exhibit A.
7.4. Limitations on Distributions. No distribution shall be
declared by the Board and paid by the Company unless, after giving affect to the
distribution, the Company will be able to pay its debts as they become due in
the normal course of business and the fair value of the assets of the Company
are more than the sum of the Company's total liabilities excluding liabilities
to Members on account of their Membership Interests and liabilities for which
the recourse of creditors is limited to specified property of the Company,
except that the fair value of property that is subject to a liability for which
the recourse of creditors is limited shall be included in the assets of the
Company only to the extent that the fair value of the property exceeds that
liability.
7.4.1. Basis of Determination of Solvency for Distributions.
The Board may base a determination that a distribution is not prohibited under
Section 7.4 either on (a) financial statements prepared on the basis of
accounting practices and principles that are reasonable in the circumstances or
(b) a fair valuation or other method that is reasonable in the circumstances.
7.5. Distribution Restrictions. No distributions shall be made
to the Members pursuant to this Article VII if such distributions would violate
any provision or covenants of or contained in loan agreements, licenses or other
agreements, of the Company ("Distribution Restrictions").
7.6. Distribution in Termination of the Company. Except for
reductions as a result of damages (liquidated or otherwise) on withdrawal as
provided in this Agreement, all distributions of proceeds following or in
anticipation of liquidation of the Company, after (a) payment of the debts and
other liabilities of the Company (other than to the Members), (b) the incurred
and expected expenses of liquidation including the purchase of "tail insurance"
with respect to the Company, and (c) the establishment of a reasonable reserve
for contingent or unknown liabilities of the Company in an amount agreed to by
the Board, shall be made in accordance with Regulation ss. 1.704-
1(b)(2)(ii)(b)(2) in proportion to the positive Capital Account balances of the
Members determined after taking into account all the allocations and adjustments
to the Capital Accounts for the Company's taxable years in which the dissolution
event occurs and during which the liquidation occurs.
ARTICLE VIII
NEW MEMBERS
8.1. Approval of New Members. No other Person shall be made a
Member without the approval of, if the BE Condition is met, a Super-Majority
Vote of the Members and, if the BE Condition is not met, a Majority Vote of the
Members.
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8.1.1. New Membership Interests. The Company may not issue any
additional Class One or Class Two Membership Interests without the approval of,
if the BE Condition is met, a Super-Majority Vote of the Members and, if the BE
Condition is not met, a Majority Vote of the Members.
8.2. Admission of Members. No new Member shall be admitted
until he or she accepts, ratifies and agrees to be bound by the terms and
conditions of the Certificate of Formation and this Agreement.
Schedule A shall be promptly revised to reflect the admission
of the new Member when all of the conditions of Section 8.1 and this Section 8.2
have been complied with.
8.3. Statements of Membership Interests. Membership Interests
shall not be represented by certificates. Within five (5) Business Days after
the written request of any Member, the Company shall provide to such Member a
written statement of such Member's Membership Interest, including Class, as of
the time the Company makes such written statement. Pursuant to the Act, such
statement shall not be deemed to be a certificated security, a negotiable
instrument, a bond or a stock, and shall not be a vehicle by which any transfer
of any Member's Membership Interest may be effected.
ARTICLE IX
MEMBER MEETINGS AND MANAGEMENT
9.1. Meetings of Members.
9.1.1. Annual Meetings. The annual meeting of Members shall be
held on such date and time as is determined by the Board. The first annual
meeting shall be called by the Board within twelve (12) months of the
organization of the Company and shall occur in the same month thereafter. The
annual meeting of the Members shall be at such time as may be designated by the
Board and stated in the notice of meeting, and shall be for the purpose of
electing Governors and transacting such other business as may be properly
brought before the meeting.
9.1.2. Special Meetings. Special meetings of Members may be
called for any purpose or purposes by the Chief Manager or any Governor upon
providing to the secretary (or other appropriate officer) of the Company a
written demand for the meeting. Such demand must describe the purpose or
purposes for which the meeting is to be held.
9.1.3. Notice of Membership Meetings. A written notice of each
meeting of Members stating the place, date and time of the meeting, and, in the
case of a special meeting, describing the purpose or purposes for which the
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meeting is called, shall be given to each Member entitled to notice of such
meeting not less than ten (10) days nor more than two (2) months before the date
of the meeting. Such notice shall be given as provided in Section 19.1 and shall
be effective as provided in the Act.
9.1.4. Waiver of Notice of Meeting of Members. A Member may
waive any notice required to be given by the Act or this Agreement before or
after the date and time stated in the notice. The waiver must be in writing,
signed by the Member entitled to the notice and delivered to the Company and
filed in the Company's minutes or records, except that a Member's attendance at
or participation in a meeting shall constitute a waiver of notice under the Act.
Neither the business to be transacted at, nor the purpose of, any meeting of the
Members need be specified in any waiver of notice.
9.1.5. Location of Member Meetings. Meetings of Members shall
be held at such places, within or without the State of Delaware, at such time as
may be designated in the notice of meeting. A meeting of the Members may be held
by electronic communications in which each Member may hear the others talking.
9.1.6. Quorum of Members. The Members entitled to vote may
take action on a matter at a meeting of the Members only if a Quorum exists with
respect to that matter. If the Members participating in a Member meeting do not
constitute a Quorum, additional meetings of the Members may be convened at
intervals of no less than five (5) days after the immediately preceding meeting
at which a Quorum was not present by sending notice of such meetings to all
Members by facsimile. The third such meeting shall be deemed to have a Quorum
irrespective of the number of Membership Interests held by participating
Members, and if Members holding less than 75% of the Membership Interests
entitled to vote attend the meeting all actions taken at such meeting may be
approved by a Majority Vote, including those actions which require, by the terms
of this Agreement, a Super-Majority Vote.
9.1.7. Adjournment of Meetings of Members. If a meeting of
Members is adjourned to another date, time or place, notice need not be given of
the adjourned meeting if the new date, time and place are announced at the
meeting before the adjournment. At the adjourned meeting, the Members may
transact any business which might have been transacted at the time originally
designated for the meeting if a Quorum existed at the time originally designated
for the meeting; provided that if a new record date is or must be fixed under
the Act or this Agreement, a notice of the adjourned meeting must be given to
Members as of the new record date.
9.2. Action Without a Meeting of the Members. Any action
required or permitted to be taken at a meeting of the Members may be taken
without a meeting if:
(a) A waiver of the meeting is signed by Members holding
over seventy-five percent (75%) of the Membership Interests;
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(b) The action is evidenced by one or more written consents
describing the action taken and executed by Members holding Percentage
Interests sufficient to pass such action at a meeting of the Members;
and
(c) Such written waiver and evidence of action is delivered to
the secretary (or other appropriate officer) of the Company for filing
with the Company records.
9.2.1. Effective Date of Member Action by Consent. Action
taken by written consent is effective when the last required Member executes the
waiver or evidence of action, unless the evidence of action specifies a
different date.
9.3. Activities Requiring Member Approval. Notwithstanding
anything to the contrary herein, the Board may not authorize, and the Company
may not undertake without the prior written consent of the Members holding, if
the BE Condition is met, a Super-Majority Vote of the Membership Interests and,
if the BE Condition is not met, a Majority Vote, any of the following actions:
(a) Any steps to wind up, dissolve, liquidate, reorganize, or
otherwise terminate the existence of the Company, other than as
provided in Article XVI;
(b) Any merger of the Company;
(c) The making of any loan to any Member by the Company;
(d) The approval of a contribution agreement relating to the
contribution of capital to the Company by any new Member;
(e) Any assessment of or capital contributions by the Members;
(f) The sale, lease, exchange, or other disposition of all or
substantially all of the assets of the Company not in the ordinary
course of business;
(g) The execution by the Company of an agreement containing
Distribution Restrictions as defined in Section 7.5; and
(h) The approval of the Annual Reports prepared in accordance
with Section 15.3.2.
ARTICLE X
BOARD OF GOVERNORS
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10.1. Management of the Company. Except as otherwise provided
in this Agreement, the management and control of the Company and of its business
and affairs shall rest with the Board which shall collectively exercise such
rights in accordance with this Article X. The Board shall have all of the powers
and duties not reserved to the Members under the Act or this Agreement.
10.1.1. Governor is Not an Agent. Unless so authorized in a
Board or Member resolution, a Governor shall not have the authority, in his or
her capacity as Governor, to execute contracts or other documents to bind the
Company. A Governor, by virtue of being a Governor, is not an agent for the
Company.
10.2. Election of Board. The Members shall elect the Board of
Governors which shall consist of five (5) Governors. Three (3) of the Governors
shall be elected by a Majority Vote of the Class One Members and two (2) of the
Governors shall be elected by a Majority Vote of the Class Two Members, provided
that if the BE Condition is not met the Governors shall be elected by a Majority
Vote of all Members.
10.3. Term of Office of Governor. Governors shall serve for a
term of one (1) year and until his or her successor is elected and qualified or
until the death, resignation, expulsion, removal or disqualification of the
Governor, whichever shall occur earlier. If any Member shall cease for any
reason to be a Member, then any Governor who would not have been elected but for
the vote of such Member shall resign. In the event of a vacancy on the Board,
during such time as the BE Condition is met, the Member(s) of the Class entitled
to elect such Governor shall be entitled to fill such vacancy for the balance of
the unexpired term.
10.4. Compensation of Governors. If the BE Condition is met,
the compensation, if any, of the Governors shall be established by a
Super-Majority Vote of Members. If the BE Condition is not met, such
compensation shall be established by a Majority Vote of Members. If any Governor
is compensated for serving as a Governor, all Governors will be likewise
compensated. Governors shall be entitled to reimbursement for any reasonable
expenses incurred in attending meetings and otherwise carrying out their duties.
Governors may serve the Company in any other capacity and receive compensation
therefor.
10.5. Expulsion of a Governor. A Governor shall be expelled
for (a) actual fraud against the Company, (b) gross negligence in the
performance of his or her duties as a Governor, or (c) conviction of a felony.
10.6. Actions by the Board. Except as provided in Section
10.6.1 or as otherwise specifically provided herein, all actions by the Board
shall be taken by a Majority Vote.
10.6.1. Major Decisions. The actions ("Major Decisions") set
forth on Schedule 10.6.1 require, before effectuation, approval by, if the BE
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Condition is met, a Super-Majority Vote of the Governors and, if the BE
Condition is not met, a Majority Vote of Governors.
10.7. Committees of the Board.
10.7.1. General. The Board, by Majority Vote, may create one
(1) or more committees. A committee shall consist of two (2) or more Governors
who serve at the pleasure of the Board. For so long as the BE Condition is met,
each such committee shall have at least one (1) Governor appointed by the Class
Two Member. Any such committee, to the extent specified by the Board, may
exercise the authority of the Board in supervising the management of the
business and affairs of the Company, except that a committee may not: (a)
authorize distributions, except according to a formula or method prescribed by
the Board; (b) approve or propose to Members action required by law to be
approved by Members; (c) fill vacancies on the Board or any of its committees;
(d) amend the Certificate of Formation or propose amendments to the Certificate
of Formation; or (e) make any Major Decision, other than the pricing decisions
described in item (j) of Schedule 10.6.1. Any action of a committee may be
overruled by the Board.
10.7.2. Pricing Committee. The Board shall designate a pricing
committee (the "Pricing Committee") consisting of one Governor selected by the
Class One Member and one Governor selected by the Class Two Members. The Pricing
Committee shall have full authority to determine the pricing policies and
guidelines of the Company and its Subsidiaries.
10.8. Meetings of the Board.
10.8.1. Regular Meetings of the Board. Regular meetings of the Board
may be held without notice at such places, within or without the State of
Delaware, on such dates and at such times as the Board may determine from time
to time, but the Board shall, in any event, hold at least four (4) regular
meetings during each fiscal year.
10.8.2. Special Meetings of the Board. Special meetings of the
Board may be called by the Chief Manager or any Governor and shall be held at
such places, within or without the State of Delaware, on such dates and at such
times as may be stated in the notice of meeting.
10.8.3. Notices for Board Meetings. Special meetings of the
Board must be preceded by at least two (2) Business Days' notice of the date,
time and place of the meeting. The notice need not describe the purpose of the
meeting. Notice of an adjourned meeting need not be given, if the time and place
to which the meeting is adjourned are fixed at the meeting at which the
adjournment is taken and if the period of any one (1) adjournment does not
exceed one (1) month.
10.8.4. Waiver of Notice of Board Meeting. A Governor may
waive any notice required to be given by the Act or this Agreement before or
after the date and time stated in the notice. The waiver must be in writing,
signed by the Governor entitled to the notice and delivered to the Company and
filed in the Company's minutes or records, except that a Governor's attendance
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at or participation in a meeting shall constitute a waiver of notice under the
Act. Neither the business to be transacted at, nor the purpose of, any meeting
of the Board need be specified in any waiver of notice.
10.8.5. Telephonic Board Meeting. Any or all Governors may
participate in a regular or special meeting by telephone conference or any other
means of communication by which all Governors participating may simultaneously
hear each other during the meeting. A Governor participating in a meeting by
this means is deemed to be present in person at the meeting.
10.8.6. Quorum of Governors. The Governors may take action on
a matter at a meeting of the Board only if a Quorum exists with respect to that
matter. If the Governors participating in a meeting of the Board do not
constitute a Quorum, additional meetings of the Board may be convened at
intervals of no less than five (5) days after the immediately preceding meeting
at which a Quorum was not present by sending notice of such meetings to all
Governors by facsimile. The third such meeting shall be deemed to have a Quorum
irrespective of the number of participating Governors and, if less than 80% of
the Governors attend the meeting, all actions taken at such meeting may be
approved by a Majority Vote, including those actions which require, by the terms
of this Agreement, a Super-Majority Vote.
10.8.7. Action by Proxy. Any Governor may exercise his or her
right to vote at any meeting by granting a proxy to any other Governor to vote
on its behalf and at its direction on any or all matters presented at any
meeting of the Board.
10.8.8. Board Action Without a Meeting. Any action required or
permitted to be taken at a meeting of the Board may be taken without a meeting
if:
(a) A waiver of the meeting is signed by a majority of the
Governors;
(b) The action is evidenced by one (1) or more written
consents describing the action taken and executed by Governors
sufficient to pass such action at a meeting of the Board; and
(c) Such written waiver and evidence of action shall be
delivered to the secretary (or other appropriate officer) of the
Company for filing with the Company records and prompt notice of such
action shall be provided to any Governor who has not executed the
action on written consent.
10.8.9. Effective Date of Board Action by Consent. Board
action taken by written consent is effective when the last required Governor
executes the waiver or evidence of action, unless the evidence of action
specifies a different date.
ARTICLE XI
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DEADLOCKS
11.1. Definition of Deadlock. For purposes of this Agreement,
if the BE Condition is met, a "Deadlock" shall be deemed to exist if the Members
or the Board, as the case may be, are unable to reach a decision on a matter set
forth in Sections 9.3(d), 9.3(e), 9.3(h) or items (a), (e), (f), (i), (o), (q),
and (r) of Schedule 10.6.1 (each a "Key Decision") after such Key Decision has
been discussed at two (2) meetings of Members or the Board, as the case may be,
at which a Quorum was present throughout.
11.2. Referral to Chief Executive Officers. If a Deadlock
arises either Member may request, by providing written notice (a "Referral
Notice") to the other Member within fifteen (15) days of the second of the two
(2) meetings at which such Key Decision is not resolved, that the resolution of
such Deadlock be referred to the Chief Executive Officers of the Members (each a
"CEO"). Within fifteen (15) days of the delivery of the Referral Notice, each
Member shall prepare a written memorandum to be provided to each CEO setting
forth such Member's views on the Key Decision. The CEOs shall negotiate to
resolve such Deadlock in good faith.
11.3. Auction. If, at any time after February 28, 2001, the
CEOs are unable to resolve a Deadlock within thirty (30) days of the delivery of
the memoranda described in Section 11.2, either Member (the "Auctioning Member")
may provide written notice (the "Auction Notice") to the other Member stating
that it wishes to buy from the other Member (the "Receiving Member") all of the
Membership Interests held by such Receiving Member, at the price set forth in
the Auction Notice; provided, that such price shall be no less than the price
set forth on Schedule 11.3.
11.3.1. Within ten (10) days of its receipt of an Auction
Notice, the Receiving Member shall provide written notice to the Auctioning
Member whether it (a) accepts the offer (the "Notice of Acceptance") set forth
in the Auction Notice, in which case the Receiving Member shall sell to the
Auctioning Member, and the Auctioning Member shall purchase from the Receiving
Member, all of the Membership Interests of the Receiving Member on the terms set
forth in the Auction Notice, such purchase and sale to take place on the later
of (x) the day which is thirty (30) days after receipt of the Notice of
Acceptance or (y) the day all regulatory approvals are received, or (b) rejects
the offer (the "Notice of Rejection") but offers to purchase the Membership
Interests of the Auctioning Member at a price set forth in the Notice of
Rejection, which price shall represent an increase of at least five percent (5%)
(with such increase to be calculated assuming that the auction contemplated by
this Section 11.3 was for the purchase of one hundred percent (100%) of the
Membership Interests of the Company) as compared to the purchase price set forth
in the Auction Notice.
11.3.2. The Auctioning Member shall have ten (10) days after
receipt of a Notice of Rejection to provide the Receiving Member with a Notice
of Acceptance or a Notice of Rejection, which shall set forth a price, which
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price shall represent an increase of at least five percent (5%) (with such
increase to be calculated assuming that the auction contemplated by this Section
11.3 was for the purchase of one hundred percent (100%) of the Membership
Interests of the Company) as compared to the purchase price set forth in the
Notice of Rejection it received.
11.3.3. The process set forth above shall continue until one
Member (the "Seller") sends the other Member (the "Buyer") a Notice of
Acceptance. The Seller shall sell to the Buyer and the Buyer shall purchase from
the Seller, all of the Membership Interests of the Seller on the terms set forth
in the last Notice of Rejection, such sale to take place on the later of (x) the
day which is thirty (30) days after receipt of the Notice of Acceptance or (y)
the day on which all regulatory approvals are received.
11.3.4. At the closing of any sale pursuant to this Section
11.3, the Seller shall execute and deliver to the Buyer an assignment of its
Membership Interests and any other instruments that the Buyer may reasonably
require to give the Buyer good and clear title to all the Seller's right, title
and interest in and to the Membership Interests being purchased.
11.3.5. If Sextant shall be the Buyer under this Article XI,
then Sextant shall have the right to purchase the Membership Interests owned by
Members other than the Seller upon the same terms and conditions as the
Membership Interests so purchased from the Seller; provided, that the aggregate
purchase price to be paid by Sextant for all Membership Interests to be
purchased pursuant to this Article XI shall be allocated among such Members
(including the Seller) on the basis of their Percentage Interests.
11.3.6. If Sextant shall be the Buyer under this Article XI
and shall acquire all of the Membership Interest of BE Aerospace, the price to
be paid by Sextant shall be increased by (1) the sum of all Priority Return
allocated to BE Aerospace pursuant to clause (ii) of Section 6.1 for all prior
years, reduced by the sum of all distributions to BE Aerospace under clause (i)
of Section 7.3 and all Tax Distributions made to BE Aerospace in respect of
allocations of Priority Returns under Section 6.1 in all prior years plus (2)
the excess of the Buy-Out Fiscal Year Priority Return over the sum of (i) the
distributions made to BE Aerospace for such fiscal year pursuant to clause (i)
of Section 7.3 plus (ii) the amount of Tax Distributions made to BE Aerospace
with respect to allocations of Priority Return under Section 6.1 for such fiscal
year.
ARTICLE XII
MANAGERS; AUDITOR
12.1. Managers. The Company shall at all times have at least
two (2) Managers, the Chief Manager and the Chief Financial Officer. The Board
may, from time to time, appoint new, additional or substitute Managers and may,
from time to time, eliminate any manager position other than that of the Chief
Manager and the Chief Financial Officer. Any Manager may, at any time and
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upon thirty (30) days' prior written notice to the Board, resign. Upon the
death, resignation or removal of the Chief Manager, the Board shall promptly
vote to appoint another Chief Manager. Upon the death, resignation or removal of
the Chief Financial Officer, the Board shall vote within thirty (30) days of
such termination to appoint another Chief Financial Officer.
12.1.1. Nomination. If the BE Condition is met, the Class One
Member shall have the exclusive right to nominate the Chief Manager and the
Class Two Members shall have the exclusive right to nominate the Chief
Financial Officer. If the BE Condition is met, each such Manager shall be
approved by a Super-Majority Vote of the Board.
12.1.2. Election and Term. At the first meeting of the Board,
the Board shall elect a Chief Manager, a Chief Financial Officer and any other
Managers as the Board may desire. The Board may designate Managers with whatever
title the Board deems appropriate. The Board may elect Managers at such
additional times as it deems advisable. Each Manager shall serve until his
successor is elected and qualified or until his earlier resignation or removal.
Any number of offices may be held by the same person.
12.1.3. Powers. The day-to-day management of the Company and
its business and affairs shall be directed by the Managers, who, subject to
direction of the Board, shall have the rights, powers and duties as specified in
this Agreement or which are necessary, advisable or convenient to the discharge
of their duties under this Agreement.
12.2. Duties of the Chief Manager. The Chief Manager shall
have the following duties:
(a) Manage, control and operate the day-to-day business of the
Company consistent with the Certificate of Formation, this Agreement,
agreements to which the Company is a party or by which the Company is
bound, the annual business plan and budget of the Company, directions
of the Board and, if applicable, the Members;
(b) See that the annual business plan and budget of the
Company, and all other orders and resolutions of the Board or, if
applicable, the Members, are carried into effect;
(c) Sign and deliver, in the name of the Company, any deeds,
mortgages, bonds, contracts or other instruments or agreements
pertaining to the business of the Company which are in good faith
deemed by the Chief Manager to be necessary or appropriate to the
proper operation of the business or to effectively and properly perform
the Chief Manager's duties or exercise his or her power hereunder,
except in cases in which another Manager is authorized by the Board to
sign and deliver such documents;
(d) Perform other duties as directed by the Board or Members
or as prescribed by this Agreement or authorized under the Act. The
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Chief Manager shall have full authority to act for and on behalf of the
Company, and any action taken by the Chief Manager shall constitute an
act of the Company and serve to bind the Company unless the other party
to such act has actual knowledge such action was unauthorized. In
dealing with the Chief Manager acting on behalf of the Company in its
ordinary course of business, no Person shall be required to inquire
into the authority of the Chief Manager to bind the Company. Persons
dealing with the Company in its ordinary course of business are
entitled to rely upon the power and authority of the Chief Manager as
set forth in this Agreement; and
(e) Prior to November 1 of each year, provide the Board with a
business plan, including, but not limited to a budget for the following
calendar year in sufficient detail as shall be reasonably satisfactory
to the Board. At a minimum, such budget shall set forth budgeted
operating income and operating expenses in reasonable detail, any
budgeted capital expenditures, budgeted bookings, budgeted back-logs
and any budgeted amounts payable by the Company to any Member,
Affiliated Persons of any Member and any of their employees, officers
or directors. The Chief Manager shall manage the Company in accordance
with such annual business plan and budget, including any modifications
approved by the Board on a quarterly basis, in all material respects.
From the date hereof until the date upon which the Board adopts an
annual business plan and budget, the Company shall be operated in
accord ance with the business plan prepared by BE Aerospace prior to
the date hereof, a copy of which is attached hereto as Schedule 12.2
provided, however, during such period no engineering, research and
development expenditures may be made by the Company or its Subsidiaries
in respect of the development of "next generation" In-Flight
Entertainment Systems. The Company will use its best efforts to adopt a
new annual business plan and budget by no later than April 30, 1999. If
the new annual business plan and budget shall not have been agreed to
by April 30, 1999, the matter shall be referred to the CEO of each
Member for resolution.
12.3. Duties of the Chief Financial Officer. The Chief
Financial Officer shall have the following duties:
(a) Keep the financial books and records of the Company in
accordance with generally accepted accounting practices;
(b) Keep charge of and be responsible for all funds,
securities, receipts and disbursements of the Company;
(c) Prepare appropriate operating budgets and financial
statements;
(d) Prepare and file required tax records; and
(e) Perform other duties prescribed from time to time by the
Board or the Chief Manager.
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12.4. Additional Managers. Additional Managers may be
appointed by the Board. Such Managers shall carry duties as delegated by the
Chief Manager or prescribed by the Board.
12.5. Compensation of Managers. Managers shall receive no
compensation except as approved by the Board. No Member, nor any Affiliated
Person of any Member, shall provide any compensation to any Manager or any other
employees of the Company or any Subsidiary of the Company, except as described
in Schedule 12.5 hereto.
12.6. Exclusivity of Service. No Governor or Manager (without
the prior written consent of the Board), during the period during which he or
she may serve in such capacity, may, directly or indirectly, be interested in,
engage in, be concerned with, or provide services to, any other Person
whatsoever wherever in the world located which competes with the business of the
Company and its Affiliated Persons (whether as an employee, officer, director,
manager, governor, agent, partner, consultant or otherwise).
12.7. Standard of Conduct of Managers. Each Manager shall
discharge and perform his duties and responsibilities under this Agreement in
accordance with the general standards of conduct prescribed by the Act.
12.8. Auditor. The auditor of the Company shall be Mazars &
Guerard, until their removal or replacement pursuant to item (m) of Schedule
10.6.1.
ARTICLE XIII
AFFILIATED TRANSACTIONS
13.1. Dealing With Affiliated Persons. The Company may acquire
property or services from, and have other transactions with, one or more Members
or Affiliated Persons subject to the following limitations:
13.1.1. Written Agreement. Until the adoption of the
guidelines contemplated by Section 13.2, all transactions between the Company
and the Members or an Affiliated Person shall be evidenced in writing and shall
be approved by a Super-Majority Vote of the Board.
13.1.2. Intentionally Omitted
13.1.3. Loans to the Company from Members or Affiliated
Persons. The Company may borrow funds from a Member or an Affiliated Person of a
Member on terms and conditions that are competitive with or more favorable to
the Company than may otherwise be available to the Company. An unsecured loan
bearing interest at the nationally prevailing prime rate of interest as
published by The Wall Street Journal shall be presumed to be competitive.
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13.1.4. No Requirement to Loan Funds or Guarantee
Indebtedness. No Member is obligated to loan funds to the Company or provide any
guarantee of any Indebtedness of the Company or to continue loaning funds or
providing guarantees to the Company, except as such Member may expressly agree
in writing; provided, that it is agreed and understood that in the event that
the annual business plan adopted pursuant to this Agreement shall provide for
the making of loans or guarantees by the Members, unless otherwise stated in
such business plan or otherwise agreed to by the Members, the obligation to make
such loans or provide such guarantees shall be apportioned among the Members on
the basis of their Percentage Interests.
13.2. Policy. The Governors shall adopt a policy regarding the
guidelines for transactions between the Company or its Subsidiaries, on the one
hand, and Affiliated Persons, on the other hand, including transactions with
Affiliated Persons of Members. Except as provided in Section 13.1.1, no
transactions between the Company or its Subsidiaries and any Affiliated Persons,
including Affiliated Persons of Members, may be entered into prior to the
adoption of guidelines governing such transactions.
13.3. Reports. The Company shall prepare and distribute to the
Board quarterly reports setting forth, in reasonable detail, transactions
described in Section 13.2 undertaken during such period.
ARTICLE XIV
INDEMNIFICATION
14.1. Indemnification. The Company shall indemnify any Person
made a party to a proceeding because such individual is or was a Member, Manager
or Governor against liability incurred in the proceeding to the extent permitted
under the Act unless such liability was the result of the gross negligence or
willful misconduct of such Member, Manager or Governor. Advances of expenses
shall also be made to the extent permitted under the Act.
14.2. Insurance. The Company may purchase and maintain
insurance on behalf of any Person who is or was a Member, Manager, Governor,
employee, independent contractor or agent of the Company or who, while a Member,
Manager, Governor, employee, independent contractor or agent of the Company, is
or was serving at the request of the Company as a Member, Manager, Governor,
employee, director, officer, independent contractor, agent, partner or trustee
of another foreign or domestic limited liability company, corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise,
against liability asserted against or incurred by such Person in that capacity
or arising from such Person's status as a Member, Manager, Governor, employee,
independent contractor or agent of the Company whether or not the Company would
have the power to indemnify such Person against the same liability as provided
in Sections 14.1, 14.2 or 14.3.
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14.3. Non-Exclusive Right. The indemnification and advancement
of expenses granted pursuant to, or provided by, this Article XIV shall not be
deemed exclusive of any other rights to which a Person seeking indemnification
or advancement of expenses may be entitled, whether contained in this Article
XIV, the Act, a resolution of the Members, or an agreement provid ing for such
indemnification; provided that no indemnification may be made to or on behalf of
any person if a judgment or other final adjudication adverse to the person
establishes his or her liability for (a) any breach of duty of loyalty to the
Company or its Members, (b) acts or omissions not taken or made in good faith or
which involve intentional misconduct or a knowing violation of law, or (c) any
liability for wrongful distributions incurred under the Act.
Nothing in this Article XIV shall effect any rights to
indemnification to which the Company's personnel may be entitled by contract or
otherwise under law. This Article XIV does not limit the Company's power to pay
or reimburse expenses incurred by any person in connection with his or her
appearance as a witness in a proceeding at a time when he or she has not been
named a defendant or respondent to the proceeding.
ARTICLE XV
FISCAL MATTERS
15.1. Fiscal Year. The fiscal year (and taxable year) of the
Company shall end on December 31 of each year. The taxable year of the Company
shall be the same as its fiscal year, unless otherwise required by Section 706
of the Code.
15.2. Books and Records. Full and accurate books and records
of the Company (including without limitation all information and records
required by the Act) shall be maintained at the Company's principal executive
office or at such other place or places within the United States as determined
by the Board. Such books and records shall show all receipts and expenditures,
assets and liabilities, profits and losses, all other records necessary for
recording the Company's business and affairs, and as required by the Act. All
Members shall have access to the books and records of the Company for any lawful
purpose which is consistent with the best interest of the Company, during
regular business hours, at the Company's principal executive office, upon
provision of notice in writing by any Member to the Company at least five (5)
Business Days before the date on which any Member desires to inspect said books
and records.
15.3. Reports to Members. Each of the following reports shall
be prepared at the Company's expense, and shall be delivered to each Member.
15.3.1. Tax Information. To the maximum extent reasonably
possible, within seventy-five (75) calendar days after the end of each fiscal
year, information for the preparation of income tax returns.
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15.3.2. Annual Reports. Within one hundred twenty (120) days
after the end of each fiscal year, an annual report of the activities of the
Company, including a balance sheet as of the end of such year, an income
statement and a statement of Cash for the year.
15.3.3. Reports to the Board. The Company shall provide to
each Governor, within fifteen (15) calendar days after the end of each fiscal
quarter, copies of a profit and loss statement showing the results of the
operation of the Company for such fiscal quarter and the fiscal year to date, as
well as a comparison of the actual results of the Company to the annual business
plan and budget for such period, together with a management report which shall
contain an explanation of material variances from such annual business plan and
budget.
15.4. Tax Matters Representative. Sextant or its successor in
interest shall be the Tax Matters Representative (the "TMR") and shall be
responsible for all administrative and judicial proceedings for the assessment
and collection of tax deficiencies or the refund of tax overpayments arising out
of a Member's distributive share of items of income, deduction, credit and/or of
any other Company item (as that term is defined in the Code or in Regulations
issued by the Internal Revenue Service) allocated to the Members affecting any
Member's tax liability.
The TMR shall promptly give notice to all Members of any
administrative or judicial proceeding pending before the Internal Revenue
Service involving any Company item and the progress of any such proceeding. Such
notice shall be in compliance with such regulations as are issued by the
Internal Revenue Service.
The TMR shall have all the powers provided to a tax matters
partner in ss.ss. 6221-6233 of Code, including the specific power to extend the
statute of limitations with respect to any matter which is attributable to any
Company item or affecting any item pending before the Internal Revenue Service
and to select the forum to litigate any tax issue or liability arising from
Company items.
The TMR may resign his position by giving thirty (30) calendar
days' written notice to the Board, whereupon the Board shall designate a new
TMR.
The TMR shall be entitled to reimbursement for any and all
reasonable expenses incurred with respect to any administrative and/or judicial
proceedings affecting the Company.
The TMR, as designated by this Agreement, shall have the power
to make or revoke the tax elections that the Company is entitled to make or
revoke at the entity level. These tax elections include but are not limited to:
(a) Method of accounting; and
(b) ss. 754 elections.
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The Company hereby agrees to indemnify and hold harmless the
TMR and each director, officer, employee, agent and Affiliated Person thereof
(each an "indemnified person") from and against any and all actions, suits,
proceedings (including investigations or inquiries), claims, losses, damages,
liabilities or expenses of any kind or nature whatsoever which may be incurred
by or asserted against or involve the TMR or any other such indemnified person
as a result of or arising out of or in any way related to or resulting from its
acting as, or failure to act as, tax matters representative under this Agreement
and, upon demand, to pay and reimburse the TMR and each other indemnified person
for any reasonable legal or other out-of-pocket expenses incurred in connection
with investigating, defending or preparing to defend any such action, suit,
proceeding (including any inquiry or investigation) or claim (whether or not the
TMR or any other such Person is a party to any action or proceeding out of which
any such expenses arise); provided that the Company shall have no obligation to
indemnify any indemnified person against any loss, claim, damage, expense or
liability to the extent same resulted from the gross negligence or willful
misconduct of the respective indemnified person.
ARTICLE XVI
DISSOLUTION EVENTS
16.1. Dissolution. The Company shall be dissolved (a) if the
BE Condition is met, on the recommendation of, a Super-Majority Vote of the
Governors and by the Super-Majority Vote of the Members and, if the BE Condition
is not met, on the recommendation of a Majority Vote of the Governors and by the
Majority Vote of the Members, or (b) upon the occurrence of a Dissolution Event,
as defined below, unless there is at least one (1) remaining Member and
Dissolution Avoidance Consent, as defined below, is timely given.
16.1.1. Dissolution Avoidance Consent. If, after the
occurrence of a Dissolution Event of the type described in Section 16.1.2(c),
there is at least one (1) Member remaining and such Member or Members, by a
Majority in Interest of such Members, elect to continue the business of the
Company within ninety (90) calendar days after the occurrence of such
Dissolution Event, the Company shall not dissolve and terminate. Such timely
action is referred to herein as "Dissolution Avoidance Consent." Such
Dissolution Avoidance Consent may be evidenced in writing or in such other
method or manner as the Board may approve, including electronic means, facsimile
transmission or orally at a meeting of the remaining Members.
16.1.2. Events Causing Dissolution. "Dissolution Event" shall
mean the occurrence of any of the following events:
(a) the sale of all or substantially all of the assets of the
Company and the expiration of any indemnity period or escrow or the
payment of any deferred payment relating to such sale;
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(b) the entry of a decree of judicial dissolution under
Section 18-802 of the Act; or
(c) the Bankruptcy of a Member or the default by a Member
under any covenant contained herein, which default is not remedied
within ninety (90) calendar days of notice thereof being given to the
defaulting Member (the "Failed Member").
16.2. Withdrawal. Notwithstanding the foregoing, a Member
without the consent of a Majority Vote of the remaining Members, does not have
the right under this Agreement to withdraw in a manner that would cause the
Company to be obligated to redeem the Membership Interest of such Member.
16.3. General Effect of a Dissolution Event. A Dissolution
Event as defined in Section 16.1.2 shall cause the dissolution and termination
of the Company unless timely Dissolution Avoidance Consent is given. Such
Dissolution Avoidance Consent may be evidenced in writing or in such other
method as the Board may approve, including, without limitation, electronic
means, facsimile transmission or orally at a meeting of Members.
16.3.1. If a timely Dissolution Avoidance Consent is given
upon the occurrence of a Dissolution Event set forth in Section 16.1.2(c), the
remaining Members (excluding any Affiliated Person of a Failed Member (a "Failed
Member Affiliate")) shall have the option to acquire the Membership Interests of
the Failed Member and the Failed Member Affiliate at a price determined by
multiplying the aggregate Percentage Interest of such Failed Member and such
Failed Member Affiliate by the Fair Market Value (as hereinafter defined) of all
the Company's assets, determined as of the date that the notice exercising such
option is given, after deducting from the Fair Market Value all the liabilities
and obligations of the Company. The closing of the purchase and sale of such
Membership Interests (which Membership Interests shall be transferred free and
clear of all liens, encumbrances and adverse claims), shall take place on a date
specified in the aforesaid notice not more than ninety (90) calendar days after
the date of said notice. At the closing, the Failed Member and the Failed Member
Affiliate and their respective successors or representatives, shall (x) execute
and deliver to the purchasing Member an assignment of their respective
Membership Interests and any other instruments that the purchasing Member may
reasonably require to give the purchasing Member good and clear right and title
to all of the Failed Member's and Failed Member Affiliate's right, title and
interests in and to the Company, and (y) pay any transfer, gains or similar
taxes arising out of or in connection with the sale and transfer of their
respective Membership Interest to the purchasing Member.
16.3.2. The sale by any Failed Member and Failed Member
Affiliate of their respective Membership Interest pursuant to this Section 16.3
shall be subject to all liabilities and obligations of the Company, matured or
unmatured, absolute or contingent and, upon the consummation of such sale, the
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purchaser shall execute and deliver to the seller an instrument assuming all of
the aforesaid liabilities and obligations of the Company, together with a
covenant to hold any such seller harmless from and against all such liabilities
and obligations; provided that the foregoing shall not relieve any such seller
of any liability arising from its breach of this Agreement existing at the time
of such sale.
16.3.3. Determination of Fair Market Value. Except as may
otherwise determined in a writing signed by all Members, the fair market value
("Fair Market Value") of a Member's Membership Interest shall be determined
through an appraisal conducted by an internationally recognized investment
banker with a leading practice in aviation electronics mutually acceptable to
the Class One Member and the Class Two Members. If the Members are unable to
agree on an appraiser, any party may submit the issue to the President of the
Court of the International Chamber of Commerce who shall select an appraiser
than has no affiliation of any type with any Member. The appraiser that is so
appointed shall act as an expert and not as an arbitrator and shall be requested
to issue its report within ten (10) calendar days from the date of its
designation. The decision of said appraiser shall be final except in the case of
manifest error. The fees of such appraiser shall be borne equally by the Class
One Member, on the one hand, and the Class Two Members collectively, on the
other hand.
16.3.4. Payment. Such price shall be paid in cash, by wire
transfer in immediately available funds, within five (5) Business Days of the
determination thereof.
16.4. Advance Notice of Voluntary Dissolution. In the event
the owners of a Member decide to voluntarily dissolve the Member, the Member to
be dissolved agrees to give the other Member(s) ninety (90) calendar days' prior
written notice.
ARTICLE XVII
ASSIGNMENTS
17.1. Restriction on Assignment. No Member shall assign his
Membership Interest except as expressly permitted in this Article XVII. Any
attempted assignment of any portion of a Membership Interest which does not
comply with this Article XVII shall be null and void and have no effect and the
Company shall be under no obligation whatsoever to recognize any such
assignment.
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17.1.1. A Member may pledge or encumber its Membership
Interest to a financial institution without the consent of the other Members
provided that if any such pledgee enforces such pledge it shall have no voting
or other operational rights with respect to the Company during the time it holds
such Membership Interests and shall only dispose of such Membership Interests in
compliance with the provisions of this Article XVII.
17.2. Definition of Assignment. For purposes of this Article
XVII, the words "assign" or "assignment" when used in the context of the
transfer of a Membership Interest shall mean and include any transfer,
alienation, sale, hypothecation, or other disposition, whether voluntarily or by
operation of law.
17.3. Permitted Assignments of Membership Interest.
17.3.1. Partial Assignment. A Member may not assign less than
all of its Membership Interest.
17.3.2. Assignment to a Non-Member. A Member may assign all
but not less than all Membership Interest to a non-Member only after February
28, 2001 and only in accordance with Section 17.6.
17.4. Other Approvals. In the event that, pursuant to the
terms of any loan agreement, security agreement, deed of trust or other
agreement existing at any time between the Company and any lender, the approval
of such lender is required prior to the time that any assignment of any
Membership Interest in the Company may occur, then, not withstanding any
provision of this Article XVII to the contrary, no such assignment shall be
effective until all required approvals and/or consents of any such lender have
been obtained. Likewise, if such assignment made without necessary approvals
would cause the Company to be in violation of the terms of (a) the partnership
agreement of any partnership in which the Company is then a partner, (b) the
shareholders agreement of any corporation in which the Company is a shareholder,
or (c) the Certificate of Formation or operating agreement of any other limited
liability company in which the Company is a member, the approval of all
necessary parties to such assignment shall be required before such assignment
shall be effective.
17.5. Assignee to Assume Company Obligations. In the event
that, pursuant to this Article XVII, any Member assigns his Membership Interest
in the Company to any Person other than one (1) or more of the other Members or
the Company, no such assignment shall become effective until the proposed
transferee agrees in writing to assume and be bound by all the obligations and
restrictions to which the transferring Person is subject under the terms of this
Agreement and any further agreement with respect to the business of the Company.
Allocations of Net Profit, Net Loss and items of income, gain, loss or deduction
between an assignor and an assignee shall be made in accordance with the
principles set forth in Section 6.4.
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17.6. Call Right and Right of First Offer.
(a) "Call" Right. (i) If a Member (the "Selling Member") at
any time proposes to assign all of such Member's Membership Interests (the
"Offered Interests") then owned by the Selling Member, the Selling Member shall
first comply with the provisions of this Section 17.6. The Selling Member shall
deliver to the Company and the other Member (the "Non-Selling Member") written
notice of its intention to assign the Offered Interests (the "Offer Notice").
Within thirty (30) calendar days from the date of the delivery of the Offer
Notice (the "Buy-Back Period"), the Non-Selling Member shall have the right to
purchase (the "Call") the Offered Interests at a price equal to the price set
forth on Schedule 17.6.
(ii) The Non-Selling Member shall provide written notice of
its intent to exercise the Call hereunder to the Selling Member and the Company.
(iii) Closing of the Call shall occur as soon as is
practicable, but in any event within sixty (60) calendar days of the exercise of
the Call. At or before such closing, the parties agree to execute such documents
and cooperate in obtaining such consents and making such filings that may be
reasonably necessary to effect such closing and to transfer unencumbered and
good title to the Offered Interests. Payment shall be in cash provided, however,
that with respect to the calculation of any financial criteria used in
determining the call price, either the Selling Member or the Non-Selling Member
shall have the right to demand an audit to be performed by the Company's
independent public accountants of any or all of the fiscal quarters relevant to
the calculation of the price to be conducted as soon as is practicable after the
closing. If such audit results in the calculation of a purchase price (A)
greater than that actually paid at closing, the Non-Selling Member shall pay the
Selling Member the amount of such difference within fifteen (15) Business Days
of the completion of the audit and (B) less than that actually paid at closing,
the Selling Member shall reimburse the amount of such difference to the
Non-Selling Member within fifteen (15) Business Days of the completion of the
audit.
(b) Right of First Offer. (i) In lieu of exercising its right
set forth is subparagraph (a) of this Section 17.6, the Non-Selling Member may,
prior to the termination of the Buy-Back Period, propose to purchase the Offered
Interests by delivering a written offer to the Selling Member (the "Offer
Notice") which notice shall state the terms and conditions of such offer. The
Selling Member shall have ten (10) Business Days from the receipt of the Offer
Notice to either accept or reject the terms of the proposed offer.
(ii) If the Selling Member accepts the Non-Selling Member's
offer to purchase, the closing of the related assignment of the Offered
Interests shall occur as soon as is practicable, but in any event within sixty
(60) calendar days of the Selling Member's acceptance of the offer. Payment
shall be in cash. At or before such closing, the parties agree to execute such
documents and cooperate in obtaining such consents and making such filings that
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may be reasonably necessary to effect such closing and to transfer unencumbered
and good title to the Offered Interests.
(c) Assignment to Permitted Assignee. If prior to the
termination of the Buy-Back Period, (i) the Non-Selling Member shall not have
exercised the Call in accordance with subparagraph (a) of this Section 17.6,
(ii) the Non-Selling Member shall not have made an offer to purchase the Offered
Interests in accordance with subparagraph (b) of this Section 17.6, or (iii) the
Selling Member shall have rejected any offer to purchase made by the Non-Selling
Member in accordance with subparagraph (b) of this Section 17.6, then the
Selling Member may assign the Offered Interests to a Permitted Assignee;
provided, however, that any such assignment may not be consummated on a date
that is more than 210 days from the date that the Non-Selling Member shall have
received the Offer Notice; and provided, further, that any such assignment
(including, but not limited to, the performance of due diligence by any
potential assignee) shall be conducted in a reasonable manner and with a minimum
of disruption to the operations of the Company. If BE Aerospace shall sell all
of its Membership Interest to a Permitted Assignee pursuant to this Section
17.6, such Permitted Assignee shall succeed to BE Aerospace's rights under
Section 6.1, clause (ii) and Section 7.3 clause (i) with respect to the
remaining Priority Return.
(d) For the purposes of this Section 17.6, the term
"assignment" shall exclude from its meaning any pledge, securitization,
hypothecation or other form of security interest.
(e) If Sextant shall purchase the Membership Interests of the
Selling Member pursuant to this Section 17.6, then Sextant shall have the right
to purchase the Membership Interests owned by Members other than the Selling
Member upon the same terms and conditions as the Membership Interests so
purchased from the Selling Member; provided, that, the aggregate purchase price
to be paid by Sextant for all Membership Interests to be purchased pursuant to
this Section 17.6 shall be allocated among such Members (including the Selling
Member) on the basis of their Percentage Interests.
(f) If Sextant shall exercise its Call right pursuant to
Section 17.6(a) and shall acquire all of the Membership Interest of BE
Aerospace, the price to be paid by Sextant shall be increased by (1) the sum of
all Priority Return allocated to BE Aerospace pursuant to clause (ii) of Section
6.1 for all prior years, reduced by the sum of all distributions to BE Aerospace
under clause (i) of Section 7.3 and all Tax Distributions made to BE Aerospace
in respect of the allocations of Priority Returns under Section 6.1 in all prior
years plus (2) the excess of the Buy-Out Fiscal Year Priority Return over the
sum of (i) the distributions made to BE Aerospace for such fiscal year pursuant
to clause (i) of Section 7.3 plus (ii) the amount of Tax Distributions made to
BE Aerospace with respect to allocations of Priority Return under Section 6.1
for such fiscal year.
ARTICLE XVIII
TERM, TERMINATION, WINDING UP
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<PAGE>
18.1. Term. There is no specific term of years for the
Company.
18.2. Events Causing Dissolution and Winding Up. The Company
shall be dissolved and its affairs wound up upon: (a) the sale of all or
substantially all of the assets of the Company and the distribution of the net
proceeds therefrom; (b) the occurrence of a Dissolution Event as described in
Section 16.1.2, unless timely Dissolution Avoidance Consent is given pursuant to
Section 16.1.1; or (c) as may be otherwise provided by law. The Company shall be
terminated when the winding up of Company affairs has been completed following
dissolution.
18.3. Winding Up Affairs on Dissolution. Upon dissolution of
the Company, the Members or the other Persons required or permitted by law to
carry out the winding up of the affairs of the Company shall (a) promptly notify
all Members of such dissolution; (b) wind up the affairs of the Company; (c)
prepare and file all instruments or documents required by law to be filed to
reflect the dissolution of the Company; and (d) after paying or providing for
the payment of all liabilities and obligations of the Company, distribute the
assets of the Company as provided by the terms of this Agreement.
18.4. Distribution Upon Dissolution. Upon dissolution of the
Company and the sale of its assets, the proceeds of such sale or the assets of
the Company shall be allocated as set forth below:
(a) To pay all outstanding liabilities and expenses of the
Company, including the purchase of "tail insurance" for the Company;
(b) To establish such reserves for unknown or contingent
liabilities, including, without limitation, reserves for environmental
matters, as the Board may determine; and
(c) To each Member in accordance with Section 7.6.
ARTICLE XIX
GENERAL PROVISIONS
19.1. Notices. All notices, consents, waivers, directions,
requests, votes or other instruments or communications required or permitted to
be given or made hereunder shall be in writing and (a) delivered personally, (b)
sent by an internationally recognized overnight express courier service for next
Business Day delivery, or (c) sent by facsimile transmission to the intended
recipient thereof, at its address or facsimile number set out or referenced
below. Any such notice, consent, waiver, direction, request, vote or other
instrument or communication shall be deemed to have been duly given immediately
if delivered personally or given or made by confirmed facsimile, or the next
Business Day following sender's delivery to a nationally recognized overnight
- -37-
<PAGE>
express courier service and, in proving the same, it shall be sufficient to show
that the envelope containing the notice was delivered to the nationally
recognized overnight express courier service, pre-paid and properly addressed,
or that the receipt of the facsimile was confirmed by the recipient. Notice may
also be sent by certified mail or registered mail, postage pre-paid and properly
addressed, and will be deemed delivered five (5) Business Days following such
mailing.
19.1.1. Company Notices. In the case of the Company, notices
shall be sent to:
Sextant In-Flight Systems, LLC
Attention: Chief Executive Officer
17481 Red Hill Avenue
Irvine, CA 92614-5630
or such other address as the Company shall from time to time designate by notice
sent to the Members.
19.1.2. Member Notices. In the case of a Member, notices shall
be sent to the address of such Member as set forth in Schedule A, or such other
address as any Member may specify in writing to the other Members and the
Company.
19.2. Waiver of Right to Partition and Decree of Dissolution.
As a material inducement to each Member to execute this Agreement, each Member
covenants and represents to each other Member that, during the term of existence
of the Company, no Member, nor his heirs, representatives, successors,
transferee or assigns, will attempt to make any partition of Company assets
whether now owned or hereafter acquired, and each Member waives all rights of
partition provided by statute or principles of law or equity, including
partition in kind or partition by sale. The Members agree that irreparable
damage would be done to the goodwill and reputation of the Company if any Member
should bring an action in a court to dissolve the Company. The Members also
agree that there are fair and just provisions for payment and liquidation of the
interest of any Member, and fair and just provisions to prevent a Member from
selling or otherwise alienating his interest in the Company. Accordingly, each
Member hereby waives and renounces his right to seek such a court decree of
dissolution or to seek the appointment by court of a liquidator or receiver for
the Company.
19.3. Non-Competition Covenant. (a) Each Member agrees that,
from the date hereof until the date three (3) years after the Member or any of
its Affiliated Persons no longer holds any Membership Interest or, if earlier,
the date of the dissolution or liquidation of the Company (or any successor
thereto) (the "Non-Competition Period"), within any jurisdiction or marketing
area in which the Company or any of its Affiliated Persons is doing business or
is qualified to do business, directly or indirectly it shall not own, manage,
operate, control, be employed by or participate in the ownership, management,
operation or control of, or be connected in any manner with any In-Flight
Entertainment Business other than the Company; provided, that either Member may
- -38-
<PAGE>
incorporate goods and services produced by an In-Flight Entertainment Business
other than the Company in such Member's products if customers of such Member
request it to do so; and provided further that, notwithstanding the immediately
preceding proviso, each of the Members hereby agree to use its commercially
reasonable efforts to promote the use by such Member's customers of the
Company's products and provided, further, that nothing contained in this Section
19.3 shall restrict or prohibit any Member from providing repair or maintenance
service to Persons manufacturing, selling or using In-Flight Entertainment
Systems.
(b) Each Member also agrees for the duration of the
Non-Competition Period not to persuade or attempt to persuade any potential
customer to which the Company or any of its Subsidiaries has made a
presentation, or with which the Company or any of its Subsidiaries has been
having discussions, not to hire the Company or such Subsidiary, or to hire
another company.
(c) Each Member also agrees for the duration of the
Non-Competition Period not to solicit for itself or any Person other than the
Company or any of its Subsidiaries the business of any Person, in connection
with the sale of In-Flight Entertainment Systems, which is a customer, supplier
or distributor of the Company or any of its Subsidiaries, or was its customer,
supplier or distributor within two (2) years prior to the date of this
Agreement.
(d) Each Member acknowledges that a breach of its covenants
contained in Section 19.3(a)-(c) may cause irreparable damage to the other
Members, the exact amount of which will be difficult to ascertain, and that the
remedies at law for any such breach will be inadequate. Accordingly, each of the
Members agrees that if it breaches any of the covenants contained in Section
19.3(a)-(c) in addition to any other remedy which may be available at law or in
equity, the other Members shall be entitled to specific performance and
injunctive relief.
(e) The Members further acknowledge that the time, scope,
geographic area and other provisions of Section 19.3(a) have been specifically
negotiated by sophisticated commercial parties and agree that all such
provisions are reasonable under the circumstances of the activities contemplated
by this Agreement. In the event that the agreements in Section 19.3(a) shall be
determined by any court of competent jurisdiction to be unenforceable by reason
of their extending for too great a period of time or over too great a
geographical area or by reason of their being too extensive in any other
respect, they shall be interpreted to extend only over the maximum period of
time for which they may be enforceable and/or over the maximum geographical area
as to which they may be enforceable and/or to the maximum extent in all other
respects as to which they may be enforceable, all as determined by such court in
such action.
19.4. Integration. This Agreement embodies the entire
agreement and understanding among the Members and supersedes all prior
agreements and understandings written or oral, if any, among and between the
Members relating to the subject matter hereof.
19.5. Applicable Law. This Agreement and the rights of the
- -39-
<PAGE>
Members shall be governed by and construed and enforced in accordance with the
laws of the State of Delaware other than Article XI, Article XVII, Section 19.3
and Section 19.11 all of which shall be construed and enforced in accordance
with the laws of the State of New York.
19.6. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated hereby be consummated as originally
contemplated to the greatest extent possible.
19.7. Binding Effect. Except as herein otherwise provided to
the contrary, this Agreement shall be binding upon, and inure to the benefit of,
the Members and their respective heirs, executors, administrators, successors,
transferee and assigns.
19.8. Amendment. This Agreement may be amended, modified or
supplemented only by the unanimous consent of the Members. Notwithstanding the
preceding, Schedule A shall be revised to reflect any action taken by the
Members pursuant to this Agreement or as otherwise necessary to update or
correct the information on Schedule A in accordance with this Agreement or
actions of the Members not in violation of terms of this Agreement.
19.9. Method of Accounting. The Company shall utilize the
accrual method of accounting for financial and tax purposes.
19.10. Section Captions. Section and other captions contained
in this Agreement are for reference purposes only and are in no way intended to
describe, interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof.
19.11. Confidentiality
19.11.1. Disclosure and Use Restrictions. Any information
relating to each Member's business, operations, and finances which are
proprietary to, or considered proprietary by, a Member or the Company are
hereinafter referred to as "Confidential Information". All Confidential
Information in tangible form (plans, writings, drawings, computer software and
programs, etc.) or provided to or conveyed orally or visually to a receiving
Member, shall be presumed to be proprietary at the time of delivery to the
receiving Member. All such proprietary information shall be protected by the
receiving Member from disclosure with the same degree of care with which the
receiving Member protects its own Confidential Information from disclosure. Each
Member agrees: (i) not to disclose such Confidential Information to any Person
- -40-
<PAGE>
except to those of its employees or representatives who need to know such
Confidential Information in connection with the conduct of the business of the
Company and who have agreed to maintain the confidentiality of such Confidential
Information; and (ii) neither it nor any of its employees or representatives
will use the Confidential Information for any purpose other than in connection
with the conduct of the business of the Company; provided that such restrictions
shall not apply if such Confidential Information:
(x) is or hereafter becomes public, unless such publication is
a breach of this Agreement;
(y) was already in the receiving Member's possession prior to
any disclosure of the Confidential Information to the receiving Member
by the divulging Member; or
(z) has been or is hereafter obtained by the receiving Member
from a third party and the receiving Member is not aware that such
third party is bound by any confidentiality obligation to the divulging
Member with respect to the Confidential Information;
provided further that nothing herein shall prevent any Member from disclosing
any portion of such Confidential Information (1) to the Company and allowing the
Company to use such Confidential Information in connection with the Company's
business, or (2) pursuant to judicial order, but only to the extent of such
order and after reasonable notice to the original divulging Member.
19.11.2. Safeguarding. The Members and their Affiliated
Persons shall each act to safeguard the secrecy and confidentiality of, and any
proprietary rights to, any non-public information relating to the Company and
its business, except to the extent such information is required to be disclosed
by law or reasonably necessary to be disclosed in order to carry out the
business of the Company. Each Member may, from time to time, provide the other
Members written notice of its non-public information which is subject to this
Section 19.11.
19.11.3. Termination. The obligations contained in this
Section 19.11 shall terminate two years after the termination of this Agreement.
19.12. Arbitration. (a) In the event of any dispute in
connection with or arising out of the existence, validity, construction or
performance of this Agreement (or any terms hereof) other than pursuant to
Article XI, the terms of which shall take precedence over the terms of this
Section 19.12 with respect to the resolution of Deadlocks but not otherwise
(collectively, a "Dispute"), the parties hereto shall attempt in good faith to
negotiate and resolve any such Dispute. If after good faith negotiations the
Dispute shall have not been resolved, any Member may deliver to the other
members written notice of its intention to submit the matter to arbitration (the
"Arbitration Notice"). If the matter is not resolved within ten (10) Business
Days after the delivery of the Arbitration Notice, or such later date as may be
mutually agreed upon, then all Disputes shall be finally settled by arbitration.
- -41-
<PAGE>
(b) The seat of the arbitration shall be in New York, and the
arbitration shall be conducted in English, in accordance with the Rules of
Conciliation and Arbitration of the International Chamber of Commerce by one or
more arbitrators appointed in accordance with such rules. The arbitrators are
precluded from considering or awarding consequential, special, punitive or
exemplary damages to any Member in any arbitration conducted pursuant hereto.
The Members shall have the right to present documentary evidence and witnesses.
The Members shall also have the right to cross-examine witnesses. The decision
of the arbitrators shall be final and binding upon the Members, and no Members
shall seek recourse to a law court or other authorities to appeal for revisions
of such decision. Nothing herein shall limit the ability of a Member or the
Company to seek temporary or preliminary injunctive relief pending arbitration.
19.13. Counterpart Execution. This Agreement may be executed
in one or more counterparts all of which together shall constitute one (1) and
the same Agreement.
- -42-
<PAGE>
IN WITNESS WHEREOF, this Agreement is executed effective as of
the date first set forth above.
SEXTANT AVIONIQUE, INC., as Class One Member
By: /s/ Willy Moses
-------------------------------------------------
Name: Willy Moses
Title: President
BE AEROSPACE, INC., as Class Two Member
By: /s/ Thomas P. McCaffrey
-------------------------------------------------
Name: Thomas P. McCaffrey
Title: Corporate Senior Vice President and
Chief Financial Officer
BE INTELLECTUAL PROPERTY, INC., as Class Two Member
By: /s/ Thomas P. McCaffrey
-------------------------------------------------
Name: Thomas P. McCaffrey
Title: Corporate Senior Vice President and
Chief Financial Officer
PURITAN-BENNETT AERO SYSTEMS CO., as Class Two Member
By: /s/ Thomas P. McCaffrey
-------------------------------------------------
Name: Thomas P. McCaffrey
Title: Corporate Senior Vice President and
Chief Financial Officer
<PAGE>
SCHEDULE A
TO
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
SEXTANT IN-FLIGHT SYSTEMS, LLC
MEMBERS
================================================================================
Name, Address, SSN Aggregate Percentage Capital
Percentage Interest of Each Account
Interest Class Balance
- --------------------------------------------------------------------------------
Class One Member Class One
- --------------------------------------------------------------------------------
Sextant Avionique, Inc. 51% 100% (1)
1924 NW 84th Avenue
Miami, Florida 33126
Attn: Willy Moses
Facsimile: (305) 597-6366
- --------------------------------------------------------------------------------
Class Two Member Class Two
- --------------------------------------------------------------------------------
BE Aerospace, Inc. 47% 96% (1)
1400 Corporate Center Way
Wellington, Florida
Attn: Thomas McCaffrey
Facsimile: (561) 791-3966
- --------------------------------------------------------------------------------
BE Intellectual 1% 2% (1)
Property, Inc.
1400 Corporate Center Way
Wellington, Florida
Attn: Thomas McCaffrey
Facsimile: (561) 791-3966
- --------------------------------------------------------------------------------
Puritan-Bennett 1% 2% (1)
Aero Systems Co.
1400 Corporate Center Way
Wellington, Florida
Attn: Thomas McCaffrey
Facsimile: (561) 791-3966
================================================================================
<PAGE>
(1) Shall be calculated by multiplying (i) the net equity of the Company as of
February 28, 1999 according to the balance sheet audited by Mazars &
Guerard, by (ii) the Aggregate Percentage Interest of the relevant Member
as shown in column 1 of this table
<PAGE>
EXECUTION COPY
GUARANTY
Dated January 25, 1999
From
AEROSPATIALE THOMSON
ELECTRONIQUE DE VOL, ATEV, S.A.
as Guarantor
-- ---------
in favor of
BE AEROSPACE, INC.
<PAGE>
T A B L E O F C O N T E N T S
- - - - - - - - - - - - - - -
Section Page
1. Guaranty...................................................................1
2. Guaranty Absolute..........................................................1
3. Waivers and Acknowledgments................................................2
4. Representations and Warranties.............................................3
5. Amendments, Etc............................................................4
6. Notices, Etc...............................................................4
7. No Waiver; Remedies........................................................4
8. Indemnification............................................................4
9. Covenants..................................................................5
10. Continuing Guaranty........................................................5
11. Governing Law; Arbitration.................................................5
<PAGE>
GUARANTY
GUARANTY dated January 25, 1999 made by Aerospatiale Thomson
Electronique de Vol, ATEV, S.A., a societe anonyme organized under the laws of
France (the "Guarantor"), in favor of BE Aerospace, Inc., a Delaware corporation
("BE Aerospace").
PRELIMINARY STATEMENT. BE Aerospace is party to a Purchase
Agreement dated as of January 25, 1999 (said Agreement together with the
attached Disclosure Schedule and exhibits other than the Limited Liability
Company Agreement, as it may hereafter be amended, supplemented or otherwise
modified from time to time, being the "Purchase Agreement", the terms defined
therein and not otherwise defined herein being used herein as therein defined)
with Sextant Avionique, Inc., a Florida corporation (the "Purchaser"), pursuant
to which the Purchaser shall purchase from BE Aerospace a 51% Membership
Interest in In-Flight Entertainment LLC, a Delaware limited liability company
("IFE"). The Guarantor owns over 99% of the outstanding capital stock of Sextant
Avionique, S.A. which owns 100% of the outstanding capital stock of the
Purchaser. It is a condition precedent to the entry of BE Aerospace into the
Purchase Agreement that the Guarantor shall have executed and delivered this
Guaranty.
NOW, THEREFORE, in consideration of the premises and in order
to induce BE Aerospace to enter into the Purchase Agreement, the Guarantor
hereby agrees as follows:
Section 1. Guaranty. The Guarantor hereby unconditionally and
irrevocably guarantees the punctual performance and payment when due, of all
obligations, amounts and other liabilities of the Purchaser now or hereafter
existing under the Purchase Agreement, (such obligations, amounts and other
liabilities being the "Guaranteed Obligations"), and agrees to pay any and all
expenses (including reasonable counsel fees and expenses) incurred by BE
Aerospace in successfully enforcing any rights under this Guaranty. Without
limiting the generality of the foregoing, the Guarantor's liability shall extend
to all amounts that constitute part of the Guaranteed Obligations and would be
owed by the Purchaser to BE Aerospace under the Purchase Agreement but for the
fact that they are unenforceable or not allowable in either case due to the
existence of a bankruptcy, reorganization or similar proceeding involving the
Purchaser.
Section 2. Guaranty Absolute. The Guarantor guarantees that
the Guaranteed Obligations will be paid strictly in accordance with the terms of
the Purchase Agreement, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of BE Aerospace with respect thereto. The obligations of the Guarantor
under this Guaranty are independent of the Guaranteed Obligations or any other
obligations of the Purchaser under the Purchase Agreement, and a separate action
or actions may be brought and prosecuted against the Guarantor to enforce this
Guaranty, irrespective of whether any action is brought against the Purchaser or
whether the
<PAGE>
2
Purchaser is joined in any such action or actions. The liability of the
Guarantor under this Guaranty shall be irrevocable, absolute and unconditional
irrespective of, and the Guarantor hereby irrevocably waives any defenses it may
now or hereafter have in any way relating to, any or all of the following:
(a) any lack of validity or enforceability of the Purchase
Agreement or any agreement or instrument relating thereto arising from
the failure of the Purchaser to properly authorize, execute and deliver
the Purchase Agreement;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Guaranteed Obligations or any
other obligations of the Purchaser under the Purchase Agreement or any
agreement or instrument relating thereto, or any other amendment or
waiver of or any consent to departure from the Purchase Agreement;
(c) any change, restructuring or termination of the corporate
structure or existence of the Purchaser, IFE or any of their respective
subsidiaries; or
(d) any failure of BE Aerospace to disclose to the Guarantor
any information relating to the financial condition, operations,
properties or prospects of IFE or any of its subsidiaries now or in the
future known to BE Aerospace (the Guarantor waiving any duty on the
part of BE Aerospace to disclose such information).
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by BE Aerospace or any other Person upon the
insolvency, bankruptcy or reorganization of the Purchaser or IFE or otherwise,
all as though such payment had not been made.
Section 3. Waivers and Acknowledgments. (a) The Guarantor
hereby waives promptness, diligence, notice of acceptance and any other notice
with respect to any of the Guaranteed Obligations and this Guaranty and any
requirement that BE Aerospace exhaust any right or take any action against the
Purchaser or any other Person.
(b) The Guarantor hereby waives any right to revoke this
Guaranty, and acknowledges that this Guaranty is continuing in nature and
applies to all Guaranteed Obligations, whether existing now or in the future.
<PAGE>
3
Section 4. Representations and Warranties. The Guarantor
hereby represents and warrants as follows:
(a) The Guarantor is a societe anonyme duly incorporated,
validly existing and in good standing under the laws of France and has all
necessary corporate power and authority to enter into this Guaranty, to carry
out its obligations hereunder and to consummate the transactions contemplated
hereby.
(b) The Guarantor has taken all requisite corporate action to
duly authorize the execution and delivery of this Guaranty by the Guarantor, the
performance by the Guarantor of its obligations hereunder and the consummation
by the Guarantor of the transactions contemplated hereby.
(c) This Guaranty has been duly executed and delivered by the
Guarantor, and constitutes a legal, valid and binding obligation of the
Guarantor enforceable against it in accordance with its terms, subject to the
effect of any applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting creditors' rights generally and subject, as to
enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
(d) Except as may result from any facts or circumstances
relating solely to BE Aerospace, the execution, delivery and performance of this
Guaranty by the Guarantor does not and will not: (i) conflict with or violate
the Certificate of Incorporation or By-laws (or other similar applicable
documents) of the Guarantor; (ii) conflict with or violate any Law or
Governmental Order applicable to the Guarantor, except as would not,
individually or in the aggregate, have a material adverse effect on the ability
of the Guarantor to consummate, or delay the consummation of, the transactions
contemplated by this Guaranty; or (iii) result in any breach of, or constitute a
default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of any
Encumbrance on any of the assets or properties of the Guarantor pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument relating to such assets or properties to which the
Guarantor or any of its subsidiaries is a party or by which any of such assets
or properties is bound or affected, except as would not, individually or in the
aggregate, have a material adverse effect on the ability of the Guarantor to
consummate, or delay the consummation of, the transactions contemplated by this
Guaranty.
(e) The execution and delivery of this Guaranty by the
Guarantor do not, and the performance of this Guaranty by the Guarantor will
not, require any consent, approval, authorization or other action by, or filing
with or notification to, any governmental or regulatory authority.
<PAGE>
4
(f) There are no conditions precedent to the effectiveness of
this Guaranty that have not been satisfied or waived.
(g) The Guarantor owns over 99% of the outstanding capital
stock of Sextant Avionique, S.A., subject to no security interests, pledges,
mortgages, liens, charges, or adverse claims of ownership or use (collectively,
"Liens"). The Guarantor is engaged in no activities other than the holding of
the shares of Sextant Avionique, S.A. and has no material liabilities other than
liabilities arising from taxes.
Section 5. Amendments, Etc. No amendment or waiver of any
provision of this Guaranty and no consent to any departure by the Guarantor
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Guarantor and BE Aerospace, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
Section 6. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telecopy or
telex communication) and mailed, telegraphed, telecopied, telexed or delivered
to it, if to the Guarantor, addressed to it at Aerospatiale Thomson Electronique
de Vol, ATEV, S.A., Zone Aeronautique, Luis Breguet - BP 200, 78141 Velizy -
Villcoublay Cedex, France, if to BE Aerospace, at its address specified in the
Purchase Agreement. All such notices and other communications shall, when
mailed, telegraphed, telecopied or telexed, be effective when deposited in the
mails, delivered to the telegraph company, transmitted by telecopier or
confirmed by telex answerback, respectively.
Section 7. No Waiver; Remedies. No failure on the part of BE
Aerospace to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
Section 8. Indemnification. Without limitation on any other
obligations of the Guarantor or remedies of BE Aerospace under this Guaranty,
the Guarantor shall, to the fullest extent permitted by law, indemnify, defend
and save and hold harmless BE Aerospace from and against, and shall pay on
demand, any and all losses, liabilities, damages, costs, expenses and charges
(including the fees and disbursements of BE Aerospace's legal counsel) suffered
or incurred by BE Aerospace as a result of any failure of any Guaranteed
Obligations to be the legal, valid and binding obligations of the Purchaser
enforceable against the Purchaser in accordance with their terms arising from
the failure of the Purchaser to properly authorize, execute and deliver the
Purchase Agreement.
<PAGE>
5
Section 9. Covenants. (a) The Guarantor covenants and agrees
that until the termination of its obligations hereunder pursuant to Section
10(a), it will not create, incur, assume or suffer to exist any Liens upon the
shares of Sextant Avionique, S.A. held by it.
(b) The Guarantor will use best efforts (i) to cause the
relevant corporate authorities of Sextant Avionique, S.A. to approve the
issuance by Sextant Avionique, S.A. of a guaranty substantially in the form of
Exhibit A attached hereto (the "Sextant Guaranty") as soon as practicable after
the date hereof and (ii) promptly upon the receipt of such approval, to cause
Sextant Avionique, S.A. to execute and deliver to BE Aerospace the Sextant
Guaranty.
Section 10. Continuing Guaranty. This Guaranty is a continuing
guaranty and shall (a) remain in full force and effect until the earlier of (x)
the later of the payment in full in cash of the Guaranteed Obligations and all
other amounts payable under this Guaranty and the performance by the Purchaser
of all its obligations under the Purchase Agreement and (y) the execution and
delivery of the Sextant Guaranty by Sextant Avionique, S.A., and (b) not be
assignable by the Guarantor or BE Aerospace.
Section 11. Governing Law; Arbitration. (a) This Guaranty
shall be governed by, and construed in accordance with, the laws of the State of
New York.
(b) In the event of any dispute in connection with or arising
out of the existence, validity, construction or performance of this Guaranty (or
any terms hereof) (collectively, a "Dispute"), the Guarantor shall attempt in
good faith to negotiate and resolve any such Dispute with BE Aerospace. If after
good faith negotiations the Dispute shall have not been resolved, any party may
deliver to any other party written notice of its intention to submit the matter
to arbitration (the "Arbitration Notice"). If the matter is not resolved within
ten (10) Business Days after the delivery of the Arbitration Notice, or such
later date as may be mutually agreed upon, then all Disputes shall be finally
settled by arbitration. The seat of the arbitration shall be in New York, and
the arbitration shall be conducted in English, in accordance with the Rules of
Conciliation and Arbitration of the International Chamber of Commerce by one or
more arbitrators appointed in accordance with such rules. The arbitrators are
precluded from considering or awarding consequential, special, punitive or
exemplary damages to any party in any arbitration conducted pursuant hereto. The
parties shall have the right to present documentary evidence and witnesses. The
parties shall also have the right to cross-examine witnesses. The decision of
the arbitrators shall be final and binding upon all the parties, and no party
shall seek recourse to a law court or other authorities to appeal for revisions
of such decision. Nothing herein shall limit the ability of any party to seek
temporary or preliminary injunctive relief pending arbitration.
<PAGE>
S-1
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to
be duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.
AEROSPATIALE THOMSON
ELECTRONIQUE DE VOL, ATEV, S.A.
By /s/ Francois Lureau
-----------------------------------
Title: P.D.G.
<PAGE>
EXHIBIT A
GUARANTY
Dated __________, 1999
From
SEXTANT AVIONIQUE, S.A.
as Guarantor
-- ---------
in favor of
BE AEROSPACE, INC.
<PAGE>
T A B L E O F C O N T E N T S
- - - - - - - - - - - - - - -
Section Page
1. Guaranty...................................................................1
2. Guaranty Absolute..........................................................1
3. Waivers and Acknowledgments................................................2
4. Representations and Warranties.............................................3
5. Amendments, Etc............................................................4
6. Notices, Etc...............................................................4
7. No Waiver; Remedies........................................................4
8. Indemnification............................................................4
9. Release of ATEV............................................................4
10. Continuing Guaranty........................................................4
11. Governing Law; Arbitration.................................................5
<PAGE>
GUARANTY
GUARANTY dated ___________, 1999 made by Sextant Avionique,
S.A., a societe anonyme organized under the laws of France (the "Guarantor"), in
favor of BE Aerospace, Inc., a Delaware corporation ("BE Aerospace").
PRELIMINARY STATEMENT. BE Aerospace is party to a Purchase
Agreement dated as of January 25, 1999 (said Agreement together with the
attached Disclosure Schedule and exhibits other than the Limited Liability
Company Agreement, as it may hereafter be amended, supplemented or otherwise
modified from time to time, being the "Purchase Agreement", the terms defined
therein and not otherwise defined herein being used herein as therein defined)
with Sextant Avionique, Inc., a Florida corporation (the "Purchaser"), pursuant
to which the Purchaser shall purchase from BE Aerospace a 51% Membership
Interest in In-Flight Entertainment LLC, a Delaware limited liability company
("IFE"). The Guarantor owns 100% of the outstanding capital stock of the
Purchaser.
NOW, THEREFORE, in consideration of the premises and in order
to induce BE Aerospace to enter into the Purchase Agreement, the Guarantor
hereby agrees as follows:
Section 1. Guaranty. The Guarantor hereby unconditionally and
irrevocably guarantees the punctual performance and payment when due, of all
obligations, amounts and other liabilities of the Purchaser now or hereafter
existing under the Purchase Agreement, (such obligations, amounts and other
liabilities being the "Guaranteed Obligations"), and agrees to pay any and all
expenses (including reasonable counsel fees and expenses) incurred by BE
Aerospace in successfully enforcing any rights under this Guaranty. Without
limiting the generality of the foregoing, the Guarantor's liability shall extend
to all amounts that constitute part of the Guaranteed Obligations and would be
owed by the Purchaser to BE Aerospace under the Purchase Agreement but for the
fact that they are unenforceable or not allowable in either case due to the
existence of a bankruptcy, reorganization or similar proceeding involving the
Purchaser.
Section 2. Guaranty Absolute. The Guarantor guarantees that
the Guaranteed Obligations will be paid strictly in accordance with the terms of
the Purchase Agreement, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of BE Aerospace with respect thereto. The obligations of the Guarantor
under this Guaranty are independent of the Guaranteed Obligations or any other
obligations of the Purchaser under the Purchase Agreement, and a separate action
or actions may be brought and prosecuted against the Guarantor to enforce this
Guaranty, irrespective of whether any action is brought against the Purchaser or
whether the Purchaser is joined in any such action or actions. The liability of
the Guarantor under this Guaranty shall be irrevocable, absolute and
unconditional irrespective of, and the Guarantor
<PAGE>
2
hereby irrevocably waives any defenses it may now or hereafter have in any way
relating to, any or all of the following:
(a) any lack of validity or enforceability of the Purchase
Agreement or any agreement or instrument relating thereto arising from
the failure of the Purchaser to properly authorize, execute and deliver
the Purchase Agreement;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Guaranteed Obligations or any
other obligations of the Purchaser under the Purchase Agreement or any
agreement or instrument relating thereto, or any other amendment or
waiver of or any consent to departure from the Purchase Agreement;
(c) any change, restructuring or termination of the corporate
structure or existence of the Purchaser, IFE or any of their respective
subsidiaries; or
(d) any failure of BE Aerospace to disclose to the Guarantor
any information relating to the financial condition, operations,
properties or prospects of IFE or any of its subsidiaries now or in the
future known to BE Aerospace (the Guarantor waiving any duty on the
part of BE Aerospace to disclose such information).
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by BE Aerospace or any other Person upon the
insolvency, bankruptcy or reorganization of the Purchaser or IFE or otherwise,
all as though such payment had not been made.
Section 3. Waivers and Acknowledgments. (a) The Guarantor
hereby waives promptness, diligence, notice of acceptance and any other notice
with respect to any of the Guaranteed Obligations and this Guaranty and any
requirement that BE Aerospace exhaust any right or take any action against the
Purchaser or any other Person.
(b) The Guarantor hereby waives any right to revoke this
Guaranty, and acknowledges that this Guaranty is continuing in nature and
applies to all Guaranteed Obligations, whether existing now or in the future.
<PAGE>
3
Section 4. Representations and Warranties. The Guarantor
hereby represents and warrants as follows:
(a) The Guarantor is a societe anonyme duly incorporated,
validly existing and in good standing under the laws of France and has all
necessary corporate power and authority to enter into this Guaranty, to carry
out its obligations hereunder and to consummate the transactions contemplated
hereby.
(b) The Guarantor has taken all requisite corporate action to
duly authorize the execution and delivery of this Guaranty by the Guarantor, the
performance by the Guarantor of its obligations hereunder and the consummation
by the Guarantor of the transactions contemplated hereby.
(c) This Guaranty has been duly executed and delivered by the
Guarantor, and constitutes a legal, valid and binding obligation of the
Guarantor enforceable against it in accordance with its terms, subject to the
effect of any applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting creditors' rights generally and subject, as to
enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
(d) Except as may result from any facts or circumstances
relating solely to BE Aerospace, the execution, delivery and performance of this
Guaranty by the Guarantor does not and will not: (i) conflict with or violate
the Certificate of Incorporation or By-laws (or other similar applicable
documents) of the Guarantor; (ii) conflict with or violate any Law or
Governmental Order applicable to the Guarantor, except as would not,
individually or in the aggregate, have a material adverse effect on the ability
of the Guarantor to consummate, or delay the consummation of, the transactions
contemplated by this Guaranty; or (iii) result in any breach of, or constitute a
default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of any
Encumbrance on any of the assets or properties of the Guarantor pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument relating to such assets or properties to which the
Guarantor or any of its subsidiaries is a party or by which any of such assets
or properties is bound or affected, except as would not, individually or in the
aggregate, have a material adverse effect on the ability of the Guarantor to
consummate, or delay the consummation of, the transactions contemplated by this
Guaranty.
(e) The execution and delivery of this Guaranty by the
Guarantor do not, and the performance of this Guaranty by the Guarantor will
not, require any consent, approval, authorization or other action by, or filing
with or notification to, any governmental or regulatory authority.
<PAGE>
4
(f) There are no conditions precedent to the effectiveness of
this Guaranty that have not been satisfied or waived.
Section 5. Amendments, Etc. No amendment or waiver of any
provision of this Guaranty and no consent to any departure by the Guarantor
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Guarantor and BE Aerospace, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
Section 6. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telecopy or
telex communication) and mailed, telegraphed, telecopied, telexed or delivered
to it, if to the Guarantor, addressed to it at Sextant Avionique, S.A., Zone
Aeronautique, Luis Breguet - BP 200, 78141 Velizy -Villcoublay Cedex, France,
Attention: Lucien Arbel, if to BE Aerospace, at its address specified in the
Purchase Agreement. All such notices and other communications shall, when
mailed, telegraphed, telecopied or telexed, be effective when deposited in the
mails, delivered to the telegraph company, transmitted by telecopier or
confirmed by telex answerback, respectively.
Section 7. No Waiver; Remedies. No failure on the part of BE
Aerospace to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
Section 8. Indemnification. Without limitation on any other
obligations of the Guarantor or remedies of BE Aerospace under this Guaranty,
the Guarantor shall, to the fullest extent permitted by law, indemnify, defend
and save and hold harmless BE Aerospace from and against, and shall pay on
demand, any and all losses, liabilities, damages, costs, expenses and charges
(including the fees and disbursements of BE Aerospace's legal counsel) suffered
or incurred by BE Aerospace as a result of any failure of any Guaranteed
Obligations to be the legal, valid and binding obligations of the Purchaser
enforceable against the Purchaser in accordance with their terms arising from
the failure of the Purchaser to properly authorize, execute and deliver the
Purchase Agreement.
Section 9. Release of ATEV. Upon the effectiveness of this
Guaranty, the Guaranty of ATEV, provided pursuant to the Guaranty dated January
25, 1999, shall be deemed released without the necessity of any further action
by BE Aerospace.
Section 10. Continuing Guaranty. This Guaranty is a continuing
guaranty and shall (a) remain in full force and effect until the later of the
payment in full in cash of the
<PAGE>
5
Guaranteed Obligations and all other amounts payable under this Guaranty and the
performance by the Purchaser of all its obligations under the Purchase Agreement
and (b) not be assignable by the Guarantor or BE Aerospace.
Section 11. Governing Law; Arbitration. (a) This Guaranty
shall be governed by, and construed in accordance with, the laws of the State of
New York.
(b) In the event of any dispute in connection with or arising
out of the existence, validity, construction or performance of this Guaranty (or
any terms hereof) (collectively, a "Dispute"), the Guarantor shall attempt in
good faith to negotiate and resolve any such Dispute with BE Aerospace. If after
good faith negotiations the Dispute shall have not been resolved, any party may
deliver to any other party written notice of its intention to submit the matter
to arbitration (the "Arbitration Notice"). If the matter is not resolved within
ten (10) Business Days after the delivery of the Arbitration Notice, or such
later date as may be mutually agreed upon, then all Disputes shall be finally
settled by arbitration. The seat of the arbitration shall be in New York, and
the arbitration shall be conducted in English, in accordance with the Rules of
Conciliation and Arbitration of the International Chamber of Commerce by one or
more arbitrators appointed in accordance with such rules. The arbitrators are
precluded from considering or awarding consequential, special, punitive or
exemplary damages to any party in any arbitration conducted pursuant hereto. The
parties shall have the right to present documentary evidence and witnesses. The
parties shall also have the right to cross-examine witnesses. The decision of
the arbitrators shall be final and binding upon all the parties, and no party
shall seek recourse to a law court or other authorities to appeal for revisions
of such decision. Nothing herein shall limit the ability of any party to seek
temporary or preliminary injunctive relief pending arbitration.
<PAGE>
S-1
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to
be duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.
SEXTANT AVIONIQUE, S.A.
By _____________________________________
Title:
EXHIBIT 7.01(h)
[LETTERHEAD OF BANK]
February __, 1999
Sextant Avionique, Inc.
1924 NW 84th Avenue
Miami, Florida 33126
Attention: Chief Executive Officer
Dear Sir:
BE Aerospace, Inc. ("BE Aerospace") has authorized us to
confirm to you, upon receipt of your written request (which may be sent by
facsimile) the amount of credit available to BE Aerospace under its credit
facility with us. In order to submit such a request, please contact [Insert Name
of Contact], fax number: [_________].
THE CHASE MANHATTAN BANK
By:_____________________________
Name:
Title:
EXHIBIT 7.02(f)
[LETTERHEAD OF BANK]
February __, 1999
BE Aerospace, Inc.
1400 Corporate Center Way
Wellington, Florida 33414
Attention: Chief Financial Officer
Dear Sir:
Sextant Avionique, S.A. ("Sextant") has authorized us to
confirm to you, upon receipt of your written request (which may be sent by
facsimile) the amount of credit available to Sextant under its credit facility
with us. In order to submit such a request, please contact [Insert Name of
Contact], fax number: [_________].
INSERT NAME OF BANK]
By:
------------------------------------
Name:
Title:
